(Reuters) – JPMorgan has revised upwards its economic growth forecasts in the euro zone for 2025 following budgetary reforms in Germany, joining its counterpart Goldman Sachs who did the same in the midst of last week.
JPMorgan expects growth to increase by 0.1 percentage points to 0.8% this year in the euro zone and predicts growth of 1.2% in 2026, an increase of 0.3 percentage points.
“This revision is mainly linked to Germany, but we also plan a slightly stronger growth in the rest of the region thanks to the fallout and a slightly more flexible tax policy,” said JPM economists in a note dated on Friday evening.
Last week, parties in talks to train the new German government agreed to try to soften the tax rules, which would be equivalent to a borrowing boom of almost a thousand billion euros to finance defense and infrastructure expenses.
JPMorgan also warned that the uncertainty linked to Donald Trump’s customs duties could weigh on economic growth in the coming months and estimated that inflation in the euro zone should increase slightly this year and next year.
(Written by Siddarth S in Bangalore; Bertrand de Meyer, edited by Kate Entringer)
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