"First, looking at Western Europe, the recovery we projected last October for the euro area has solidified. This is reflected in our revised forecast--for example, the 2014 forecast for the euro area is up from one percent last October to 1.2 percent now, with substantial upgrades for countries such as Spain. These revisions reflect the stronger data flow on the back of past policy actions, the revival of investor confidence, and the waning drag from fiscal consolidation.
The positive impact on program countries is also palpable. There are improving economies, lower spreads, and evidence of market access.
We have also seen a welcome pickup outside the euro zone. For example, growth in the UK is picking up strongly with almost 3 percent expected for this year.
While stronger growth prospects and market sentiment are welcome, there is still much to do to solidify and boost the recovery, which remains rather weak. And unemployment is still unacceptably high in too many places.
The headwinds in the euro area are many. We have previously emphasized the role of debt overhangs in firms and households, of fragmented financial markets, and of policy uncertainty. Action is being taken to address all these areas both at the country and pan-European level, with steps to banking union--for instance, a single supervisor, the asset quality review, and the stress tests are especially important to ensure adequacy of capital and market confidence.
Low Inflation is another major problem, this puts pressure on debtors, real lending rates, relative price adjustments, and employment.
Source: IMF,2014 Spring Meeting
