EU economy is catching its breath

The EU autumn forecast expected real GDP growth to reach 0.9% in the EU and 0.8% in the euro area in 2024. Growth in the EU is to accelerate to 1.5% in 2025, as consumption is expected to pick up and investment recovers from the downturn in 2024. In 2026, economic activity is projected to increase by 1.8% as demand continues to strengthen. Growth in the euro area should follow a similar pattern, reaching 1.3% in 2025, while it could rise to 1.6% in 2026.

The highest average annual GDP growth in 2024-2026 is expected for Malta (4.53%), Croatia (3.27%), Poland (3.23%), Cyprus (2.37%) and Bulgaria (2.77%). On the other hand, it is lowest for Austria (0.6%), Germany (0.63%), Estonia (0.9%), Finland (0.93%) and Italy (0.97%). Malta's economy has maintained its growth momentum thanks to strong domestic demand, rising exports and tourism, which has surpassed pre-pandemic levels and continues to grow. By contrast, Austria is expected to have experienced a recession for the second year last year, with investment and exports falling and the economy being held back by weaker domestic consumption. Also, uncertainty in the EU's largest economy is weighing on consumption and investment, and the outlook for trade has deteriorated as global demand for manufactured goods has weakened.

According to preliminary Eurostat estimates from January 2025, GDP in the euro area remained unchanged in the fourth quarter of 2024, while in the EU, it increased by 0.1% compared to the previous quarter. In the third quarter of 2024, GDP grew by 0.4% in both regions. A first calculation of annual GDP growth for 2024, based on seasonally and calendar-adjusted quarterly data, suggests an GDP growth of 0.7% in the euro area and 0.8% in the EU in 2024.

GDP growth is increasingly affected by economic and trade fragmentation due to tensions caused by trade wars or geopolitical instability. The EU is expected to continue to liberalise trade by pursuing free trade agreements and protect its economy from unfair trade practices, especially vis-a-vis China.

The World Bank's January 2025 report says the biggest year-on-year change in GDP growth in 2025 is expected in South Asia (6.2%), East Asia (4.6%), Sub-Saharan Africa (4.1%), and the Middle East (3.4%). Meanwhile, Western Europe and the US are expected to grow by 1.7%. Per countries, South Sudan (27.0%), Guyana (14.4%), Libya (13.7%) and Senegal (9.3%) are expected to grow the most according to IMF.