Catenaa, Thursday, November 21, 2024- The International Monetary Fund (IMF) has warned that Europe’s economy is set to lag further behind the US by 2029, citing aging demographics, stagnant productivity, and lackluster business investment as key hurdles.
The IMF’s latest European Economic Outlook predicts annual GDP growth of just 1.45% for the continent over the next decade, compared to 2.29% for the US.
The gap, which has widened since the global financial crisis, highlights “fundamental” issues, according to Alfred Kammer, IMF’s Europe director. Adjusted for purchasing power, European worker productivity has fallen to 20% below US levels.
Europe’s technology sector is particularly behind, with productivity stagnant since 2005, compared to nearly 40% growth in the US.
The continent’s venture capital market, just one-quarter the size of America’s, is seen as a significant obstacle to fostering innovation and business dynamism.
The IMF called for more economic integration within the European Union to improve competitiveness and drive growth. Measures should include expanding the single market for goods, services, and capital, following recommendations by former European Central Bank president Mario Draghi. However, Kammer acknowledged that political and vested interests complicate achieving these goals.
The warning serves as a wake-up call for European policymakers to address structural barriers as the US accelerates ahead.
