19.05.2025 14:52
The European Commission has updated its economic outlook for the Eurozone and Turkey. Due to trade tensions with the United States, it has lowered the Eurozone's growth forecast for this year from 1.3% to 0.9%. It was noted that a continued decrease in inflation is expected in Turkey.
The European Commission (EC) has revised its economic growth forecast for the Eurozone this year from 1.3% to 0.9% and for next year from 1.6% to 1.4%, following trade tensions with the United States. The EC's report titled "European Economic Forecasts Spring 2025" has been published. In the report titled "Moderate Growth in a Global Economic Uncertainty Environment," it was noted that the EU economy started on a stronger footing than previously anticipated for 2025, that growth would continue moderately this year, and that despite increasing global political uncertainty and trade tensions, growth is expected to accelerate somewhat in 2026.
GROWTH EXPECTATIONS FOR THE EU ECONOMY HAVE DECLINED
The report forecasts that the EU economy will grow by 1.1% in 2025 and 1.5% in 2026, while the Eurozone economy is expected to grow by 0.9% in 2025 and 1.4% in 2026. In the previous "autumn" report from the EC, it was predicted that the EU would grow by 1.5% in 2025 and 1.8% in 2026, while the Eurozone was expected to grow by 1.3% in 2025 and 1.6% in 2026. With the latest report, the EU's growth forecasts for 2025 and 2026 have been revised downward. The growth forecast for the Eurozone has also been reduced by 0.4% for 2025 and 0.2% for 2026.
GERMANY WILL NOT GROW AT ALL
The report states, "In today's forecast, the growth outlook has been significantly revised downward. This is due to the weakening global trade outlook and high uncertainty regarding trade policy." It is predicted that Austria will shrink by 0.3% this year, Germany will not grow, while France is expected to grow by 0.6%, Italy by 0.7%, and Spain by 2.6%. For next year, it is forecasted that Germany will grow by 1.1%, France by 1.3%, Italy by 0.9%, and Spain by 2%. The report also indicates that inflation is expected to be 2.3% in the EU and 2.1% in the Eurozone this year, and that the inflation rate is predicted to decrease to 1.9% in the EU and 1.7% in the Eurozone by 2026.
"NEW CUSTOMS TARIFFS ARE A HEAVY BURDEN"
The report notes that the world was largely unprepared for the protectionist changes in U.S. trade policy, and highlights that the increase in customs tariffs announced on April 2 has caused shockwaves in the global economy. It recalls that tariffs were suspended following a sharp reaction from financial markets, stating that U.S. trade policy has created uncertainty and poses a heavy burden on the global outlook. The report points out that the agreement to partially roll back tariffs between the U.S. and China on May 12 is a positive development, but "tariffs remain at high levels and will inevitably result in a gradual decline in U.S.-China trade flows. The EU, being the most open economy in the world, feels this tension. Weak economic expansion in global markets will inevitably slow export growth." The report indicates that the risks in the economic outlook are downward, stating, "Further fragmentation of global trade could reduce growth and re-ignite inflationary pressures."
CONTINUED DECREASE IN INFLATION EXPECTED IN TURKEY
The report also evaluates the Turkish economy, noting that the decrease in inflation is expected to continue due to tight monetary and fiscal policies and lower energy prices. It states that a reduction in the budget deficit is anticipated and that public debt will remain at moderate levels. The report forecasts that the Turkish economy will grow by 2.8% in 2025 and 3.5% in 2026.
Valdis Dombrovskis, the EC Member responsible for the economy, stated at a press conference in Brussels regarding the report, "The EU economy is showing resilience in the face of high trade tensions and increasing global uncertainty." He pointed out that growth in Europe is expected to continue at a moderate pace in 2025, and that inflation has decreased faster than previously anticipated. Dombrovskis remarked, "The risks in the outlook remain downward. Therefore, we must take decisive steps to enhance our competitiveness within the EU."