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Just days before the start of 2025, analysts have trimmed expectations for the Eurozone's economic growth. A Bloomberg survey of economists now projects the European economy will expand by 1% next year—a modest acceleration from the 0.8% growth seen in 2024 but still below earlier forecasts of 1.2%. The outlook for 2026 has also been downgraded, with growth now expected to hit 1.2%, down from 1.4%.
The challenges are particularly acute for Germany, the Eurozone's largest economy, which continues to grapple with a manufacturing slump. Economists predict Germany will grow by just 0.4% in 2025 and 1% in 2026, revising both figures downward by 0.3 percentage points. France is also facing a downgraded growth outlook, though Spain offers a rare bright spot with slightly improved forecasts.
These projections paint a grimmer picture than the European Central Bank's (ECB) latest forecasts, even as the ECB took steps this month to bolster growth by cutting interest rates for the fourth time since June.
ECB officials remain cautiously optimistic about an economic rebound. They are pinning their hopes on rising household incomes and inflation stabilizing at the 2% target to drive consumption.
“There are good reasons to believe that there will be an improvement in the economy in 2025 and 2026,” ECB Chief Economist Philip Lane said on a recent podcast. However, he warned of lingering caution among consumers. “Even though consumption is growing now, there may be a bit of a lag in that, because in a world of uncertainty, some people may be cautious about consumption decisions,” Lane added.
Inflation in the Eurozone is expected to hit 2% by the second quarter of 2025 and hold steady before dipping slightly to 1.9% in 2026, according to Bloomberg's survey. Core inflation—a measure that strips out volatile items like food and energy—is projected to reach 2% by the third quarter of 2025, an improvement from earlier predictions.
While these forecasts suggest progress in taming inflation, they underline the economic uncertainty heading into the new year. With growth prospects dimmed and uneven performance across member states, the Eurozone enters 2025 facing a delicate balancing act.
