Eurozone Growth Outlook Downgraded; Disinflation To Proceed More Swiftly: EU

(RTTNews) - Eurozone economic growth outlook was downgraded substantially for 2025 due to the impact of higher trade tariffs and elevated uncertainty and disinflation would proceed more swiftly than anticipated with headline inflation set to hit the 2 percent target by the middle of this year, the European Commission said Monday.

In the Spring Forecast, the EU said real gross domestic product is likely to grow only 0.9 percent this year, reflecting a sharp downward revision from the autumn forecast of 1.3 percent. The growth projection for 2026 was lowered 1.4 percent from 1.6 percent. The EU said consumption will keep expanding and investment will accelerate after rebounding in 2025.

The EU said disinflation is set to proceed more swiftly than expected in the prior forecast, with disinflationary factors from ongoing trade tensions outweighing higher food prices and stronger short-term demand pressures.

Eurozone inflation is expected to hit the European Central Bank's target by the middle of 2025, which was earlier than previously projected.

For the whole year of 2025, inflation is expected to be 2.1 percent, unchanged from the autumn forecast. Inflation forecast for next year was lowered to 1.7 percent from 1.9 percent.

All big-four economies, except Germany, are expected to return to growth in 2025. France and Italy are expected to grow just below average, while Spain is projected to grow strongly.

After contracting marginally for two consecutive years, the German economy is projected to broadly stagnate in 2025. Real GDP is expected to return to growth in 2026, at 1.1 percent.

France's economic activity is expected to decelerate strongly in 2025, to 0.6 percent, held back by fiscal adjustment and trade-related uncertainty. Real growth is forecast to pick up to 1.3 percent in 2026, as investment recovers and higher real wages support private consumption growth.

Spain's real growth is expected to remain robust in 2025, reaching 2.6 percent, supported by strong private consumption and investment. However, growth will soften in 2026 to 2.0 percent, the EU said.

Underpinned by domestic demand, Italy's GDP growth is expected to remain stable at 0.7 percent in 2025 and to rise to 0.9 percent in 2026.

EU growth is expected to grow 1.1 percent in 2025 and improve to 1.5 percent in 2026, supported by continued consumption growth and a rebound of investment. EU inflation is expected to slow to 2.3 percent this year and to 1.9 percent in 2026.