Brussels, 07/11/2001 (Agence Europe) - The International Monetary Fund (IMF) has sharply scaled back its economic predictions for the eurozone and is continuing to pressurise the European Central Bank (ECB) to reduce interest rates. The Washington body cut back its growth forecasts for the eurozone in 2001 and 2002 to 1.6% and 1.5%, compared with 1.8% and 2.2% respectively, announced Michael Deppler, Department of the Europe division of the IMF, on Tuesday. These are the first IMF forecasts taking into account the 11 September attacks in New York and Washington. The new figures announced by Mr Deppler (calculated using Eurostat standards) are slightly different from the ones in the IMF report on monetary policy and exchange rates in the eurozone (1.7% in 2001 and 1.6% in 2002) that were published on Tuesday but based on US rules. Mr Deppler noted that the forecasts would have to be scaled back still further, particularly for 2002, unless the IFO indicator (measuring business confidence in Germany) or a similar indicator were to rebound unexpectedly. The IMF would have preferred an even more gloomy scenario forecasting growth of 0.5% to 1.% below the current forecasts for 2001 and 2002.
Inflation in the eurozone is expected to fall to 1.5% in 2002 according to the IMF, compared with and annual rate of 2.4% in October; The ECB has wide room for manoeuvre for cutting interest rates, especially if the euro picks up value, argues the IMF, being relatively optimistic about the European currency picking up. Its low level against the dollar is mainly due to the (past) over inflated levels of the stock markets in the US and Europe and by the international diversification of eurozone investors, explained Mr Deppler. The IMF is counting on a 50 base point drop in the ECB rates by the second half of 2002, he added. The IMF also called on eurozone governments to use "economic stabilisers" and coloured the prospects for Europe somewhat by stressing that the economic fundamentals were "quite strong". The 11 September events have led to a slight fall in economic activity but nothing disastrous for the eurozone.