Eurozone posts higher-than-expected growth in 2025: +1.3 percent vs 0.9 percent forecast

Brussels – Things went better than expected, but they could be worse than forecast. That is the key to understanding the European Commission’s Autumn Economic Forecast 2025. In the end, fears over US tariffs expressed in the May forecast did not materialise. As a result, the Eurozone’s growth was almost half a point higher in 2025, reaching 1.3 percent instead of 0.9 percent. The case for 2026, however, is different, as the EU executive cuts 0.2 percentage points from growth, which is now expected to be 1.2 percent, instead of 1.4 percent. A slight rebound is expected for 2027 (1.4 per cent, +0.2 percentage points).

 “This forecast recognises better-than-expected performance in the first three quarters of 2025, and therefore revises upwards the real GDP growth projection for the full year,” clarifies Marteen Verwey, Director-General of the DG ECOFIN of the European Commission, responsible for the publication. However, he urges caution as downside risks remain.

 “The imposition of significantly high US tariffs, now at the highest level in almost a century, marks a fundamental change in the international trade order,” the senior European official explains in the introduction to the forecast. “Although it is not known yet exactly how the global trading system will respond to this development, the EU must react proactively.” This implies far-reaching reforms to “unblock the growth potential.” It “requires bold measures to counteract the drag represented by an ageing population and low growth in total factor productivity.”

What is particularly worrying is the Sino-American economic and trade challenge, admits Commissioner for the Economy Valdis Dombrovskis, who is convinced that “trade policy decisions by the United States and the responses of other key players like China will dampen global trade.”

Commissioner for the Economy, Valdis Dombrovskis [Brussels, November 17, 2025. Photo: Emanuele Bonini] 

Then there is the war between Russia and Ukraine, which fuels headwinds for growth, with the uncertainties associated with the conflict’s consequences going forward. In short, things went better than expected in 2025, but that does not mean it will be the same for the years to follow. 

Eurozone, France, and Germany restart. Spain slows down

 In the general climate, good news for the Eurozone comes from expectations for the Franco-German engine. France, albeit timidly, is expected to see its economy expand over the three years (0.7 percent in 2025, 0.9 percent in 2026, and 1.1 percent in 2027). Things will be even better for Germany, which will see an economic recovery (0.2 percent in 2025, 1.2 percent in 2026, and 1.2 percent in 2027). Among the major eurozone economies, Spain’s growth is expected to slow, albeit at a faster pace than the others (2.9 percent in 2025, 2.3 percent in 2026, and 2 percent in 2027).

Inflation, good news

Without considering the situation in individual countries, at a general and overall level, “looking further ahead, we expect the growth to continue at a moderate pace, despite the challenging external environment,” says Economy Commissioner Valdis Dombrovskis, who once again calls for reforms, especially at the European level. In his view, it is necessary to “accelerate our work on the competitiveness agenda, such as simplification, completing the single market, and boosting innovation.”

It is time to seize the moment, also made favorable by the inflation trend, which in the eurozone is still expected to remain at reference levels (at 2.1 percent in 2025, 1.9 percent in 2026, and 2 percent in 2026). In the EU, inflation is set to remain slightly higher, falling to 2.2 percent in 2027.

Defence and trade agreements: the remedies to uncertainties

In the face of downside risks that are still present and that Brussels is not ignoring, the suggestion for all is to work on what can counteract this. Specifically, The Forecasts emphasize that “decisive progress on reforms and the competitiveness agenda, increased defence spending focused on EU production, and new trade agreements could support economic activity more than expected.”

The Commission, therefore, continues to push for the White Paper on Defence and its implementation, as well as to defend the EU-Mercosur trade agreement, which has been the source of much resistance and inter-institutional tension. The economic forecasts become, once again, the tool to defend the Commission’s work.