Euro area will outgrow the U.S. economy in 2022, 2023
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Analysts at Goldman Sachs predict that the euro area will experience a greater growth rate than the U.S. in the coming two years. This is largely due to differences in government policies.
This year the bank projects that the growth rate for the Eurozone’s 19 member countries will be 4.4%, while it is 3.5% for the United States. Goldman projects that the euro area will grow by 2.5%, while the U.S. will increase by 2.2% in 2023.
Sven Jari Stehn (Goldman’s European Chief Economist) stated that although the European picture is difficult in the short term, the region still has “more room for growth.”
CNBC interviewed him Tuesday to discuss two factors which support European growth.
In relation to recent Covid-19 economic restrictions in the euro area, he stated that “the hit is more manageable this year.”
European countries are yet to implement widespread lockdown measures despite the discovery in late 2021 of a new micron variant. These measures have prevented further economic shocks during the first weeks of 2022.
Stehn stated that the European fiscal policy will likely remain flexible this year in comparison to predictions made by economists for the United States.
He said that the eurozone “stands out in” this region.
After agreeing to access the markets to find 750 billion euro ($849 million) in 2020, the Euro zone governments will likely invest substantial sums in the future. These funds were disbursed to large numbers of EU countries in the second half of 2021. They will be continued to be distributed through 2022 if important reforms are made.
There are however doubts that the President Joe Biden’s “Build Back better” initiative will ever become reality across the Atlantic. However, the bill could result in an investment of $1.8 billion. But differences within lawmakers can pose a risk to the plan.
Goldman Sachs analyst said Monday that the outlook for fiscal legislation was particularly uncertain after negotiations over the Build Back Better act stalled in the last year.
Also, the ECB supports
Monetary policies are an important support for the better prospects of European growth.
Although the European Central Bank will likely maintain some monetary stimulation this year due to its bond-buying programs related to pandemics, it is closing down.
Jan Hatzius of Goldman Sachs said Monday, “Growth in America really must slow to get inflation back to something like 2 percent.”
He said that inflation had risen “while inflation has been rising.” [in the euro zone]However, the U.S. has seen a decline in it. Therefore policymakers in Europe seem to be more at ease with continued monetary stimulus.
Both in the U.S. as in the Euro area, inflation has increased significantly over the past months. U.S. data released in December showed the cost of living rising 6.8% in the 12 months to November — the highest increase since June 1982. On Wednesday, a new U.S. Inflation reading will be released.
Inflation was at an all-time high in eurozone, according to the most recent numbers. new record highIn December. According to preliminary data, headline inflation was 5% in December.
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