IMF says European economic recovery 'strengthening and broadening'

The International Monetary Fund (IMF), a Washington-based organisation of 189 countries, raised its forecasts for European economic growth and said recovery on the continent is "strengthening and broadening appreciably."

Economic expansion in Europe will be 2.4% this year, compared with 1.7% in 2016, the IMF said in a report. That's a 0.5 percentage point increase in the group's forecast in April. Next year growth will be 2.1%, the IMF said. That's 0.2 percentage points higher than the previous estimate.

"The European recovery is spilling over to the rest of the world, contributing significantly to global growth," the IMF said. "The recovery may be stronger than projected in the short run. But the sustainability of the rebound remains in question. Over the longer term, adverse demographic trends and subdued productivity are likely to hold back growth."

The IMF raised its economic growth forecasts for Luxembourg too. The Grand-Duchy's economy will grow 3.9% this year. That's compared with a 3.7% forecast in April. Expansion next year will be 3.6%, the IMF said. That's up from a previous 3.5% estimate.

European policymakers should take advantage of the improved prospects to "rebuild fiscal buffers and enhance the economy's capacity to grow and absorb shocks," the IMF said. Cleaning up the balance sheets of weak banks "remains a priority," it said.

The organisation said more needs to be done to strengthen the 28-nation European Union, including finishing banking and capital markets union.

(Alistair Holloway, alistair.holloway@wort.lu, +352 49 93 739)