IMF warns of the risk of a social crisis in European countries due to rising prices | Economy

IMF warns of the risk of a social crisis in European countries due to rising prices | Economy
IMF warns of the risk of a social crisis in European countries due to rising prices | Economy

The International Monetary Fund (IMF) warned of the risk of a social crisis in European countries before the escalating energy and food prices in the region; and he admitted that such friction is more likely in places with higher reception of Ukrainian refugees.

In its report on the economic situation and prospects for Europe on the occasion of its spring meetings with the World Bank (WB), the Fund makes it clear that the war in Ukraine must lead the region to rethink your spending policiesuntil now focused on placating the effects of the pandemic, and focusing on the consequences that the aforementioned conflict is already having.

But it also warns that the humanitarian catastrophe caused by Ukraine’s departure from five million refugees It makes it necessary for European countries to implement other policies that adapt to the new situation, such as labor incentives for hiring Ukrainians.

downward growth

The IMF growth forecast for the group of advanced European economies is now 3%, one point lower than in January, while that of the emerging economies is 3.2%, that is, 1.5 points less .

In this calculation, the Fund does not count Russia, Belarus or Ukraine – whose growth declines are much greater due to the conflict – nor does it include Turkey.

Besides, the inflation The average of the advanced economies will be situated this year at 5.5% and that of the emerging ones at 9.1%, according to the IMF.

The Russian invasion of Ukraine has prompted the IMF to revise its economic forecasts for 143 countries -as you have reported throughout this week-, but Europe, specifically, is for that institution the region most affected by the conflict, both for its present and future consequences.

The war has “overshadowed” the still “incomplete” exit from the pandemic in Europe, says the Fund, which warns that the rise in energy and food prices it will wreak “havoc” on demand, disrupt trade flows and “exacerbate” bottlenecks in supply chains.

And if the conflict continues, the number of refugees will increase, supply problems will grow and will add pressure to inflationaccording to the report, which warns that the “most worrying” risk would be a sudden stoppage of energy supplies.

In this regard, the Fund recalls that Europe’s vulnerability is due to the fact that most of the gas it receives is through gas pipelines and liquefied gas only represents a third of its supply, according to 2021 data, and points out that in March of this year gas reserves were only at 30% of their capacity.

In addition, the IMF stresses that higher energy and food prices can bring “social tensions”a risk that may be greater in countries hosting large numbers of refugees.

Against this background, the report warns European countries that they must address new challenges and think of new measures.

help programs

At the fiscal level, it bets that the automatic stabilizers -the budget items that are altered by changes in activity, such as those destined for unemployment benefits- “operate freely” while there is a rethinking of aid programs.

Thus, he believes that in the short term it will be necessary to launch aid programs to welcome refugees, and economic plans that are adapted to their arrival, as incentives for hiring Ukrainians who have had to flee their country.

But it also warns that it will be necessary to continue implementing or launching new plans to help the most vulnerable households and businesses with rising prices.

And the Fund has not forgotten to stress the need to increase energy security, to insist that one of the “immediate” priorities of European countries must be to prepare for the coming winter, seeking alternative supplies (to Russia) of energy and betting for alternative energies.

Furthermore, the IMF insists on ask central banks to attend not only to inflation but also to uncertaintyand specifically underlines that the European Central Bank must carefully handle the reduction in asset purchases to avoid shocks.


The article is in Spanish

Tags: IMF warns risk social crisis European countries due rising prices Economy

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