Lagarde says Europe’s economy would be even worse without the immigrants who moved in after the pandemic

A jump in the share of foreign-born workers after the pandemic helped Europe bring inflation down without sharply slower growth, European Central Bank President Christine Lagarde said Saturday.

A key factor “has been the rise in both the number and participation rate of foreign workers,” Lagarde said in a speech in Jackson Hole, Wyoming, at a Federal Reserve economic symposium. “In Germany, for example, GDP would be around 6% lower than in 2019 without the contribution of foreign workers.”

Spain’s strong post-pandemic economic growth “also owes much to the contribution of foreign labor,” she said.

Lagarde’s comments echoed a common view among economists that an influx of foreign workers helped companies expand their output and meet a spike in demand after the pandemic that followed stimulus benefits. The increased supply helped bring down inflation in Europe and the United States. Yet the rise in immigration also sparked a political backlash in both economies.

“Migration could, in principle, play a crucial role in easing” labor shortages as native populations age, Lagarde said. But “political economy pressures may increasingly limit inflows.”

Lagarde also said that a drop in inflation-adjusted wages, greater hoarding of workers by companies, and an influx of elderly people into the labor force also contributed to steady economic growth even as the ECB lifted interest rates.

Historically, Lagarde emphasized, higher borrowing costs have dragged down economic growth, often causing recessions and leading to higher unemployment. Yet that didn’t happen as the ECB raised its key rate in 2022 and 2023.

While foreign born workers accounted for just 9% of the EU’s labor force in 2022, they have made up half of the bloc’s labor force growth in the past three years, Lagarde said.

More elderly people also joined the workforce, Lagarde noted. Without that increase, the unemployment rate in the 20 countries that use the euro currency would be elevated — 6.6%, rather than the current rate of 6.3%, she said.

Kazuo Ueda, governor of the Bank of Japan, spoke on the same panel at Jackson Hole and noted a similar trend in Japan since the pandemic. While the foreign-born make up just 3% of the workforce, they have made up half of recent workforce growth.

This story was originally featured on Fortune.com