{"id":159903,"date":"2025-05-20T12:10:46","date_gmt":"2025-05-20T10:10:46","guid":{"rendered":"https:\/\/www.cde.ual.es\/?p=159903"},"modified":"2025-05-20T12:10:46","modified_gmt":"2025-05-20T10:10:46","slug":"spring-2025-economic-forecast","status":"publish","type":"post","link":"https:\/\/www.cde.ual.es\/en\/spring-2025-economic-forecast\/","title":{"rendered":"Spring 2025 Economic Forecast"},"content":{"rendered":"<div style=\"text-align: justify;\"><span xml:lang=\"EN-IE\" data-contrast=\"auto\">The EU economy began 2025 on a somewhat stronger footing than anticipated. It is projected to keep growing at a modest rate this year, with growth expected to pick up in 2026, despite heightened global policy uncertainty and trade tensions.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">The Commission&#8217;s Spring 2025 Economic Forecast projects real GDP to grow by 1.1% in 2025 in the EU and 0.9% in the euro area, broadly the same pace as recorded in 2024. In 2026, growth is expected to accelerate to 1.5% in the EU and 1.4% in the euro area.\u00a0<\/span><span xml:lang=\"EN-GB\" data-contrast=\"auto\">Headline inflation in the euro area is expected to slow down from 2.4% in 2024 to an average of 2.1% in 2025 and 1.7% in 2026. In the EU, inflation is set to follow similar dynamics from a slightly higher level in 2024, falling just below 2% in 2026.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><img decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/www.cde.ual.es\/wp-content\/uploads\/2020\/03\/finance-economy.jpg\" width=\"481\" height=\"318\" \/><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><strong><span xml:lang=\"EN-IE\" data-contrast=\"auto\">A deteriorated outlook but a resilient economy<\/span>\u00a0<\/strong><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">In the last quarter of 2024, the EU economy recorded stronger than expected growth, at 0.4%, largely thanks to robust domestic demand. This positive momentum continued in the first quarter of 2025, with preliminary data suggesting real GDP growth of 0.3%.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">In today&#8217;s forecast, the outlook for growth is revised significantly downward. This largely owes to a weakening global trade outlook and higher trade policy uncertainty.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">The Spring Forecast is based on certain assumptions about trade tariffs. Tariffs on US imports of goods from the EU, and virtually all other trade partners, were assumed in the model to remain at 10%, the level applied on 9 April, with the exception of higher tariffs on steel and aluminium and cars (at 25%), and tariff exemptions on certain products (pharma and microprocessors). Bilateral tariffs between US and China were assumed to be lower than those applied on 9 April, but sufficiently high to lead to a significant reduction of US-China bilateral trade of goods. The tariff rates eventually agreed by China and the US on 12 May have turned out to be lower than those assumed,\u00a0<\/span><span xml:lang=\"EN-GB\" data-contrast=\"auto\">but still high enough not to invalidate the assumption of a hit to the US-China trade relationship.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Global growth outside the EU is now projected at 3.2% for both 2025 and 2026, down from the 3.6% rate forecast in autumn 2024. This downward revision largely reflects a weakened outlook for both the US and China. The slowdown of global trade is even sharper.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Consequently, EU exports are expected to grow by only 0.7% this year, with a renewed contraction in exports of goods partially offset by resilience of services exports \u2013 as they are less affected by trade tensions. In 2026, export growth is set to accelerate to 2.1%.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Uncertainty, more so than tariffs, weighs on domestic demand. Following a 1.8% contraction in gross fixed capital formation for 2024, a moderate recovery of investment is on the horizon. This is more muted than expected in autumn, as lower overall activity reduces capital needs. Meanwhile the\u00a0<\/span><span xml:lang=\"EN-US\" data-contrast=\"auto\">volatile market response to the trade tensions is having a tightening impact on financing conditions.<\/span><span xml:lang=\"EN-IE\" data-contrast=\"auto\">\u00a0Investment is now projected to increase by 1.5% in 2025 and further accelerate to 2.4% in 2026. This acceleration is driven by infrastructure and R&amp;D investment, also thanks to support from the Recovery and Resilience Facility (RRF) and the Cohesion Fund, and a turnaround in residential construction. In 2026, equipment investment is also expected to regain vigour.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">As for private consumption, growth is expected to be slightly more robust than projected in autumn, reaching 1.5% in 2025 and 1.6% in 2026. This largely owes to stronger growth momentum in 2024 and a still resilient labour market in the context of rapidly subsiding inflationary pressures. Elevated savings, nevertheless, continue to constrain the consumption dynamics.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><strong><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Labour market remains robust, with real wages improving<\/span>\u00a0<\/strong><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">In 2024, continued expansion of employment resulted in the creation of 1.7 million new jobs in the EU economy, thus reaching a new record for the number of jobs in the Union. Despite modest economic growth, employment is projected to expand by a further 2 million jobs by the end of the forecast horizon. The unemployment rate is expected to fall to a new historic low of 5.7% in 2026.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">After having expanded by 5.3% in 2024, nominal wage growth will decelerate in 2025 and 2026. Workers will continue to benefit from real wage increases and are also expected to fully recover the purchasing power lost in recent years, which was caused by the inflation surge.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><strong><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Inflation continues to decline<\/span>\u00a0<\/strong><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">The ongoing disinflationary process, which began at the end of 2022, is expected to advance steadily. After easing to 2.4% in 2024, Harmonised Index of Consumer Prices (HICP) inflation in the euro area is projected to reach the ECB&#8217;s target of 2% already in 2025, falling further in 2026.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Energy commodity prices have declined markedly since autumn 2024 and are set to continue their downward trajectory. Likewise, a strengthened euro should also add to disinflationary pressures.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><strong><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Deficits to increase marginally<\/span>\u00a0<\/strong><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">After declining to 3.2% in 2024, the EU general government deficit is projected to increase to 3.3% in 2025 and to remain at that level in 2026.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">The debt-to-GDP ratio is expected to edge up to 83.2% of GDP in 2025 and 84.5% in 2026 at the EU level, after four years of relatively fast reduction.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><strong><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Elevated uncertainty amid global trade tensions<\/span>\u00a0<\/strong><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Risks to the outlook are tilted to the downside. Further fragmentation of global trade could mitigate GDP growth and reignite inflationary pressures.<\/span><span xml:lang=\"EN-GB\" data-contrast=\"auto\">\u00a0Climate<\/span><span xml:lang=\"EN-IE\" data-contrast=\"auto\">-related disasters are also more frequent and remain a persistent source of downside risk for growth.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-GB\" data-contrast=\"auto\">On the upside, further de-escalation of EU-US trade tensions or faster expansion of the EU&#8217;s trade with other countries, including through new free trade agreements, could sustain EU growth. Increased defence spending could also contribute positively. Advancing reforms to boost competitiveness, such as deepening the Single Market and advancing the Savings and Investments Union, as well as implementing an ambitious simplification agenda can further strengthen the resilience of the EU economy.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><strong><span xml:lang=\"EN-IE\" data-contrast=\"auto\">Background<\/span>\u00a0<\/strong><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-US\" data-contrast=\"auto\"><span data-ccp-parastyle=\"5 Normal\">This forecast is based on a set of technical assumptions concerning exchange rates, interest\u00a0<\/span><span data-ccp-parastyle=\"5 Normal\">rates<\/span><span data-ccp-parastyle=\"5 Normal\">\u00a0and commodity prices with a cut-off date of\u00a0<\/span><span data-ccp-parastyle=\"5 Normal\">25\u00a0<\/span><span data-ccp-parastyle=\"5 Normal\">April.\u00a0<\/span><span data-ccp-parastyle=\"5 Normal\">For all other incoming data, including assumptions about government policies, this forecast takes into consideration information up until, and including,\u00a0<\/span><span data-ccp-parastyle=\"5 Normal\">30\u00a0<\/span><span data-ccp-parastyle=\"5 Normal\">April.<\/span><span data-ccp-parastyle=\"5 Normal\">\u00a0Unless new policies are announced and specified in adequate detail, the projections assume no policy changes.<\/span><\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240,&quot;469777462&quot;:[284,567,851,1134,1418,1701,1985,2268,2552,3119,4253,5954,8222,11057],&quot;469777927&quot;:[0,0,0,0,0,0,0,0,0,0,0,0,0,0],&quot;469777928&quot;:[1,1,1,1,1,1,1,1,1,1,1,1,1,4]}\">\u00a0<\/span><\/p>\n<\/div>\n<div style=\"text-align: justify;\">\n<p><span xml:lang=\"EN-US\" data-contrast=\"auto\"><span data-ccp-parastyle=\"5 Normal\">The European Commission publishes two economic forecasts (spring and autumn) each year, covering a broad range of economic indicators for all EU Member States, candidate countries, EFTA countries and other major advanced and emerging market economies.\u00a0<\/span><\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240,&quot;469777462&quot;:[284,567,851,1134,1418,1701,1985,2268,2552,3119,4253,5954,8222,11057],&quot;469777927&quot;:[0,0,0,0,0,0,0,0,0,0,0,0,0,0],&quot;469777928&quot;:[1,1,1,1,1,1,1,1,1,1,1,1,1,4]}\">\u00a0<\/span><\/p>\n<\/div>\n<div>\n<p style=\"text-align: justify;\"><span xml:lang=\"EN-GB\" data-contrast=\"auto\"><span data-ccp-parastyle=\"5 Normal\">The European Commission&#8217;s Autumn 2025 Economic Forecast will update the projections in this publication and is expected to be presented in November 2025.<\/span><\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559737&quot;:57,&quot;335559739&quot;:60,&quot;335559740&quot;:240,&quot;469777462&quot;:[284,567,851,1134,1418,1701,1985,2268,2552,3119,4253,5954,8222,11057],&quot;469777927&quot;:[0,0,0,0,0,0,0,0,0,0,0,0,0,0],&quot;469777928&quot;:[1,1,1,1,1,1,1,1,1,1,1,1,1,4]}\">\u00a0<\/span><\/p>\n<p><strong>More information: <a href=\"https:\/\/ec.europa.eu\/commission\/presscorner\/detail\/en\/ip_25_1248\">European Commission<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The EU economy began 2025 on a somewhat stronger footing than anticipated. 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