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The European Fee has downgraded its forecasts for Eurozone progress to 1.3 per cent subsequent yr, because the German economic system’s issues weigh on the area.
The downgrade compares with the Fee’s earlier 2025 Eurozone progress forecast from Might of 1.4 per cent and highlights mounting gloom over the area’s prospects because it falls additional behind the US.
Brussels’ estimates stay extra optimistic than the non-public sector’s. Forecasts aggregated by Consensus Economics predict that the Eurozone economic system will develop by 1.1 per cent subsequent yr — considerably lower than the two per cent they anticipate for the US.
The Fee’s sluggish outlook for the Eurozone in contrast with a brighter view on the US economic system, which Brussels estimated would develop by 2.1 per cent in 2025, and a couple of.2 per cent in 2026.
Germany, the area’s largest economic system, has stagnated over the previous two years, as its manufacturing firms wrestle to compete with their international rivals.
The Fee now forecasts its economic system will contract by 0.1 per cent this yr, in contrast with Might’s expectation of a 0.1 per cent enlargement.
Donald Trump’s second time period within the White Home is anticipated to exacerbate the challenges dealing with the area’s exporters. The US president-elect has pledged to impose tariffs of between 10 and 20 per cent on all exports and has beforehand hit out at Europe’s massive commerce surplus with its transatlantic counterpart.
Whereas Germany, France and Italy are all anticipated to develop much less in 2025 than was anticipated by the Fee in Might, Spain’s projections have been upgraded. It’s anticipated to stay the fastest-growing massive EU economic system for the second yr in a row, after a powerful 2024.
For this yr, the Fee expects 0.8 per cent Eurozone progress, whereas non-public sector economists predict 0.7 per cent.
The Fee mentioned it anticipated inflation to hit 2.1 per cent subsequent yr, consistent with its Might estimate.
The forecasts point out that Eurozone households are saving a lot of their revenue, somewhat than spending it, holding again progress in a area the place consumption stays the motor of GDP.
Structural challenges plaguing Europe’s industrial sector — from excessive power costs to weak export demand — have taken a toll on funding, which declined by greater than 2.5 per cent within the first half of the yr, the Fee mentioned.
