The European Union (EU) Commission on the 15th (local time) forecasted that the Eurozone's Gross Domestic Product (GDP) growth rate will slightly increase from 0.8% this year to 1.3% next year.
The EU Commission stated, "As wage purchasing power gradually recovers and interest rates decline, consumption will further expand," anticipating that domestic demand will drive economic growth going forward. Following this trend, the Eurozone growth rate is expected to reach 1.6% in 2026.
Germany, the economic core of the Eurozone, is expected to record negative growth (-0.1%) this year due to contraction in consumption and investment. The outlook for trade is also bleak as global demand for industrial goods weakens. However, the Commission forecasted that domestic demand will recover supported by real wage increases, with growth rebounding to 0.7% next year and 1.3% in 2026.
France is projected to grow by 1.1% this year, supported by public spending and foreign trade, but is expected to slow to 0.8% next year due to fiscal tightening and other factors. The government fiscal deficit is forecasted to increase to 6.2% of GDP this year before decreasing to 5.3% next year.
The Eurozone inflation rate is predicted to gradually ease from 2.4% this year to 2.1% next year and 1.9% in 2026. Accordingly, the EU Commission expects household real disposable income to increase in both next year and the year after.
However, the Commission pointed out that there are still many uncertainties in the future economic outlook. It assessed, "The prolonged Russian invasion of Ukraine and escalating conflicts in the Middle East continue to pose geopolitical risks and vulnerabilities to European energy security."
Additionally, it added, "If protectionist measures by trade partners increase further, it could burden global trade and negatively impact the highly open EU economy."
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