EC downgraded its forecast for EU GDP growth in 2025 to 1.1%

In its spring review, the European Commission (EC) downgraded its forecast for EU real GDP growth in 2025 to 1.1% from 1.5% expected in November.

The estimate of the bloc’s economic growth in 2026 was revised to 1.5% from 1.8%.

As noted, the deterioration in expectations compared to the autumn 2024 forecast is largely due to the impact of rising tariffs, increased uncertainty due to recent sharp changes in US trade policy, and the unpredictability of the final configuration of duties.

According to new estimates, the eurozone economy is expected to grow by 0.9% in 2025 and by 1.4% in 2026 (1.3% and 1.6% were expected in the fall, respectively).

Germany, the largest economy in the bloc, will not show any growth at all in 2025 (the autumn review assumed a 0.7% annualized growth rate). France’s GDP is expected to grow by 0.6% y/y this year, and Italy’s by 0.7% y/y.

By the end of 2024, the European Union’s GDP grew by 1% y/y, and by 0.3% y/y in the first quarter.

Overall inflation in the euro area is expected to decline from 2.4% in 2024 to an average of 2.1% in 2025 and 1.7% in 2026. In the EU, inflation is projected to follow a similar trend, falling from a slightly higher level last year to 1.9% in 2026.

The European Commission predicts that EU exports will grow by a modest 0.7% this year and by 2.1% in 2026, in line with the decline in global demand for goods.

“This represents a significant decline compared to the autumn forecasts (by 2.2% and 3.0%, respectively). The weakness of exports is exacerbated by a loss of competitiveness, as well as increased uncertainty in trade,” the EC said in a statement.

Although, as the institution notes, EU companies are adapting their trade strategies in response to geopolitical tensions and trade fragmentation, many of them may be hesitant to bear high fixed costs, such as those associated with product adaptation, regulatory compliance, and the search for new distribution networks needed to enter new export markets.

As GMK Center reported earlier, in March 2025, seasonally adjusted industrial production in the EU increased by 1.9% compared to the previous month. In the eurozone, the figure increased by 2.6% m/m, according to preliminary Eurostat data. Compared to March 2024, industrial production in the euro area increased by 3.6%, and in the European Union – by 2.7%.