Euro area GDP to rise 1.2% in 2025, with inflation at 2.1%

Subscribe here: https://bit.ly/eudebates The European Commission forecasts that economic activity in the euro area will grow 1.3% in 2025, with headline inflation easing from 2.4% in 2024 to 2.1% in 2025, and further declining to 1.9% in 2026.

In its semiannual economic forecast, published on Friday 15 November 2024, the European Commission presented a cautious outlook for the EU economy, forecasting a modest recovery from a prolonged period of stagnation. Despite ongoing challenges, including geopolitical instability and high inflationary pressures, the commission expects economic activity to gradually pick up in the coming years.

For 2024, the European Union’s GDP is projected to grow by 0.9%, while the euro area is expected to see a slightly smaller increase of 0.8%. This marks a modest rebound following recent stagnation, stated the commission. Growth is anticipated to accelerate in 2025, with GDP forecast to rise by 1.5% in the EU and 1.3% in the euro area. By 2026, the EU’s GDP growth is expected to reach 1.8%, with the euro area growing slightly more slowly at 1.6%.

The European Union (EU) economy is beginning to show modest growth after a period of stagnation, supported by ongoing disinflation, according to the European Commission's Autumn Economic Forecast released on Friday.

"The European economy is slowly recovering. As inflation continues to ease and private consumption and investment grow, with unemployment at record lows, growth is expected to gradually accelerate over the next two years," Paolo Gentiloni, European Commissioner for Economy, said during the presentation of the forecast.

The gross domestic product (GDP) growth in the EU is projected to reach 0.9 percent in 2024, and 0.8 percent in the eurozone. In 2025, economic activity is forecast to accelerate to 1.5 percent in the EU, and 1.3 percent in the eurozone.

Headline inflation in the eurozone is set to more than halve in 2024, dropping from 5.4 percent in 2023 to 2.4 percent, before easing more gradually to 2.1 percent in 2025. In the EU, the disinflation process is expected to be even sharper, with headline inflation falling to 2.6 percent in 2024, down from 6.4 percent in 2023, and further easing to 2.4 percent in 2025.

"After resuming growth in the first quarter of 2024, the EU economy continued to expand throughout the second and third quarters at a steady, albeit subdued, pace," the Commission noted.

Meanwhile, inflation is steadily declining -- a trend that began at the end of 2022, driven largely by a sharp decrease in energy prices.

Service prices remain high, but are expected to subside from early 2025 as wage growth slows and productivity improves.

The Commission predicts that inflation will reach the European Central Bank's (ECB) target of 2 percent in late 2025 for the eurozone, and in 2026 for the EU.

However, uncertainty and downside risks to the economic outlook have grown. "Structural challenges and geopolitical uncertainty weigh on our future prospects," Gentiloni warned.

Key risks include the ongoing conflicts in Ukraine and the Middle East, which have heightened geopolitical instability and energy security concerns.

Domestically, the EU faces policy uncertainty and structural challenges in the manufacturing sector, which could lead to a loss of competitiveness, dampen growth, and impact the labor market. The European Commission also highlighted natural hazards, such as the recent floods in Spain and summer forest fires, as significant risks.

"Member states will have to walk a narrow path, reducing debt levels while supporting growth. This effort will be aided by the new economic governance framework and the continued implementation of NextGenerationEU," Gentiloni said.

Following a prolonged and broad-based stagnation, the EU economy resumed growth in the first quarter of this year. As projected in spring, the expansion continued at a subdued, yet steady, pace throughout the second and third quarters, amidst further abating inflationary pressures. The conditions for a mild acceleration of domestic demand appear in place, despite heightened uncertainty.

The EU’s economic outlook remains highly uncertain, with risks largely tilted to the downside. Russia’s protracted war of aggression against Ukraine and the intensified conflict in the Middle East fuel geopolitical risks and continued vulnerability of European energy security.

Stay connected with us!
Facebook:   / eudebates.tv  
Twitter:   / eudebates  
Instagram:   / eudebates.tv  

#eudebates the unique initiative aiming to promote debate, dialogue, knowledge, participation and communication among citizens. #inflation #EURO #Banks #Economy #Currency #BankingUnion #Eurozone #Eurogroup #GDP #austerity #forecast #Europe #protectionism #Trump #USA #tradewar #tradewars #trade #growth #Gentiloni #wages