(Reuters) – The European Commission confirmed on Friday its outlook for euro zone gross domestic product (GDP) growth for 2024, while slightly lowering its expectations for 2025, despite the recovery in consumption enabled by the slowdown in inflation and the rebound in real wages.
According to the autumn forecasts of the European executive, the GDP of the 20 countries sharing the euro will increase by 0.8% in 2024, which confirms the forecast announced in May, while it is expected to increase by 1.3% in 2025, compared to 1.4% expected in the spring.
In 2026, the Commission forecasts growth of 1.6% for the currency bloc.
“After returning to growth in the first quarter of 2024, the European economy continued to expand at a steady, albeit moderate, pace during the second and third quarters. Employment growth and the recovery in real wages continued to support disposable income, but household consumption has been limited,” explains the Commission in a press release.
“The brakes on consumption seem to be easing,” notes the European executive. “With the gradual recovery of wages and the fall in interest rates, consumption is expected to continue to increase.”
After an expected contraction in 2024, the GDP of Germany, the euro zone’s largest economy, is expected to grow by 0.7% in 2025 and 1.3% in 2026, according to Commission forecasts.
For France, the European executive expects growth of 1.1% in 2024, then 0.8% in 2025 and 1.4% in 2026.
The EU executive expects the euro zone’s harmonized consumer price index (HICP) to fall from 5.4% in 2023 to 2.4% in 2024, compared to 2.5% expected in May , and to 2.1% in 2025. In 2026, the growth of the price index would reach 2.0%, the objective of the European Central Bank (ECB).
Budgetary consolidation should also continue in the euro zone, with the debt-to-GDP ratio of the 20 countries in the bloc expected to decrease from 3.0% in 2024 to 2.9% in 2025 and 2.8% in 2026.
“The downward risks to our forecasts have become more significant,” warns the Commission, however, which refers to geopolitical tensions and an increase in protectionist measures.
(Written by Corentin Chappron, edited by Blandine Hénault)
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