“We have three main policy recommendations,” Koeva-Brooks said, highlighting that the first is “for central banks to pivot towards providing more support to activity where inflation is under control.”
By contrast, she added that governments should tighten fiscal policy to draw a line under the emergency measures of the pandemic years, as well as enacting implement structural reforms to boost productivity and increase the supply of labor.
It predicted that the eurozone will grow by only 0.8 percent this year, while the U.S., which has fared better on productivity and labor supply in recent years, will grow 2.8 percent. However, it expects an acceleration in the eurozone to 1.1 percent and a slowdown to 2.2 percent in the U.S. next year.
The Fund also expects a marked slowdown in China, despite recent efforts by Beijing to prop up the economy. It sees growth of only 4.8 percent this year, short of the official 5 percent target, slowing to 4.5 percent in 2025.
