IMF sees solid European growth this year and next

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Europe's economic recovery is solid, especially in eastern regions, despite threats from inflation and tension in peripheral states, the International Monetary Fund said Thursday.

A regional IMF economic outlook maintained growth forecasts released in April, calling for the 17-nation eurozone economy to expand by 1.6 percent this year and by 1.8 percent in 2012, along with inflation of 2.3 and 1.7 percent.

In eastern, central and southeastern European countries with the exception of those which have adopted the euro, former Soviet Union republics and Turkey, the IMF expects to see average growth of 4.3 percent this year and next.

"The main message of the outlook is one of quiet confidence. Europe is doing well overall -- both western Europe and eastern Europe -- and our projections for the coming months are actually quite positive," the report quoted the fund's European department director Antonio Borges as saying.

The eurozone is struggling with a debt crisis in countries on its southern and western rim that have raised market concerns in recent weeks and pushed the value of the euro lower against other major currencies.

IMF analysts acknowledged that "the main risk to the outlook for Europe arises from tensions in the euro area periphery," but added that concern about overheating in the continent's emerging economies "are more muted than in other regions."

The economies of Greece and Portugal were still expected to be in recession this year however.

The report forecast overall European inflation of 3.8 percent this year owing to stronger economic activity and "buoyant commodity prices," and a rate of 3.0 percent in 2012.

In forecasting a solid recovery for emerging European economies, the IMF noted that "intraregional growth disparities should diminish as the legacies of the 2008/09 crisis fade and domestic demand takes over as the main driving force."

It warned however that while economic policies had prevented sovereign debt troubles from spreading across the eurozone "so far ... contagion to the core euro area, and then onward to emerging Europe, remains a tangible downside risk."

© 2011 AFP

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