EU forecasts 'steady' eurozone growth despite 'uncertainty'

The EU Commission on Friday predicted a slight increase in growth in the eurozone currency union and a continued fall in inflation in 2025.

However, the commission also pointed to risks arising from geopolitical tensions, as well as weak investment and a high cost of living.

What was the commission's 2025 forecast?

The EU Commission's forecasts showed eurozone growth ticking up to 1.3% in 2025, up from 0.8% this year, and described the bloc's performance as "steady, albeit subdued."

It predicted inflation would drop to 2.1%, compared with 2.4% this year.

"With the EU economy steadily recovering, growth should pick up more speed next year," commission vice-president Valdis Dombrovskis said.

"Still, given today's high geopolitical uncertainty and many risks, we cannot afford to be complacent. We need to deal with longstanding structural challenges".

The commission said that both consumer demand and investment were expected to recover.

"As the purchasing power of wages gradually recovers and interest rates decline, consumption is set to expand further," it said. "Investment is expected to rebound on the back of strong corporate balance sheets, recovering profits, and improving credit conditions."

Inflation in the eurozone has dropped significantly over the past two years after reaching 8.4% in 2022 following Russia's invasion of Ukraine.

According to the forecast, EU unemployment was at a "record low" of 5.9% in October.

Commission warns of 'uncertainty'

EU Economy Commissioner Paolo Gentiloni warned that there remained "high uncertainty" in the face of geopolitical shifts and decreased consumer demand.

"High uncertainty has been weighing on consumption and investment," he said in a press conference.

"The trade outlook has been weak, reflecting weakness in global demand for industrial goods over the coming years," he said. He also said that Germany's economy was expected to decline by 0.1% in 2024 after having contracted by 0.3% in 2023. However, Gentiloni said that the eurozone's largest economy was predicted to grow by 0.7% in 2025 and 1.3% in 2026.

"A further increase in protectionist measures by trading partners could upend global trade, weighing on the EU's highly open economy," the commission said.

Donald Trump, who was elected the next US president earlier this month, has threatened to hit the EU and other parts of the world with tariffs in order to protect US industry.

Gentiloni called for EU member states to strengthen "competitiveness through investments and structural reforms" while also walking "a narrow path of bringing down debt levels while supporting growth."

sdi/ab (AFP, dpa)