Description

Europe's economy continues to grow, if at a slow pace, despite the energy shock. Growth is fragile, so macroeconomic policies will have to tread carefully. Monetary policy may have to do more, and expansionary fiscal policy should be avoided, to keep pressure off inflation. However, even after energy supply eventually normalizes, Europe's structural challenges will hold back medium-term growth. At the heart of problem is weak productivity. Europe should choose higher and more robust growth through reforms for innovation, scale, and resilience. Continuing the energy transition will help build resilience. Advancing single market and national reforms remains the most effective way to raise productivity and lift the constraints on transformative innovation. As export competition intensifies, CESEE countries should sustain growth through investment in skills and by reforms that improve labor market reallocation, strengthen competition, and foster innovation. EU candidate countries need ambitious reforms to seize the opportunity of accession.

More publications in this series: Regional Economic Outlook