IMF warns of growing US-Europe economic gap by 2030

The International Monetary Fund (IMF) has warned that the economic gap between Europe and the United States will likely grow by the end of the decade, underscoring Europe’s ongoing “lack of business dynamism.”

The IMF’s latest economic outlook for Europe predicts that structural issues such as an ageing workforce and stagnant productivity growth will reduce the continent’s GDP growth rate to 1.45% annually from 2020 to 2029, in contrast to an expected 2.29% in the US, Caliber.Az reports via foreign media.

Since the global financial crisis—and especially after the Covid-19 pandemic—US growth has consistently outpaced Europe’s. Alfred Kammer, IMF Europe director, pointed to “fundamental” challenges within Europe, noting that GDP per worker in countries like Germany, France, Italy, and Spain was once on par with the US two decades ago. Today, however, it lags by about 20%, creating a significant disparity that Kammer said has only worsened since the pandemic.

The IMF links Europe’s economic sluggishness to lower business investment, limited cross-border economic activity, and a stagnant tech sector compared to the US, where tech productivity has surged by 40% since 2005.

The IMF also pointed to Europe’s smaller venture capital sector and lower proportion of startups as signs of its diminished business vitality. Echoing recommendations from former ECB president Mario Draghi’s recent report, the IMF urged the EU to bolster competitiveness and increase investment. Still, Kammer noted that longstanding national and vested interests make economic integration challenging.

By Vugar Khalilov