FX.co ★ European Commission Lowers Growth Forecasts

The European Commission's Spring outlook anticipates that the Euro Area economy will expand by 0.9% in 2025 and 1.4% in 2026. These figures have been revised downward from the 1.3% and 1.6% growth projected last autumn. This revision is largely due to the effects of increasing tariffs and the growing uncertainty following recent dramatic changes in U.S. trade policy. Regarding inflation, the Eurozone is now expected to experience disinflation more quickly than previously estimated. Inflation is projected to decrease to 2.1% by mid-2025, achieving the European Central Bank’s target sooner than expected, and further decrease to 1.7% by 2026, compared to the prior prediction of 1.9%. For Germany, the largest economy in the Eurozone, the Commission forecasts economic stagnation in 2025. Elevated trade tensions are anticipated to significantly impact exports, although there will be a modest increase in private consumption. Investment is expected to remain unchanged for the current year. Nevertheless, economic growth in Germany is predicted to recover to 1.1% in 2026.