Brussels: The EU has lowered its economic growth forecast for the eurozone to 0.9% for 2025, down from 1.3%, according to the EU Commission's Spring 2025 Economic Forecast report on Monday. The report highlights the impact of increased tariffs and the unpredictability stemming from recent changes in US trade policy as significant factors contributing to this downgrade.
According to Anadolu Agency - English, the report details that the EU's GDP is projected to grow by 1.1% in 2025 and 1.5% in 2026. This is a reduction from the Autumn 2024 predictions, which anticipated a growth of 1.5% in 2025 and 1.8% in 2026 for the EU, and an expansion of 1.3% in 2025 and 1.6% in 2026 for the euro area.
Inflation within the EU is expected to reach 2.3% this year, with the eurozone slightly lower at 2.1%, before both decline to 1.9% and 1.7% respectively by 2026. The report underscores that the global economy was taken by surprise by the protectionist shift in US trade policy, which saw tariff increases announced on April 2 that sent ripples through financial markets. Although these tariffs were suspended following strong market reactions, the resulting uncertainty has placed a significant burden on the global economic outlook.
The report also mentions a partial withdrawal of tariffs agreed between the US and China on May 12, noting it as a positive step, yet tariffs remain elevated and are expected to gradually reduce trade flows between the two nations. The EU, being the most open economy worldwide, is already feeling the effects as weak global market expansion is anticipated to slow export growth.
Further risks to the economic outlook are noted, with concerns that additional fragmentation of global trade could impede growth and trigger renewed inflationary pressures.
The EU Commission's report also evaluates the Turkish economy, indicating an expected continuation in the decline of inflation. This is attributed to tight monetary and fiscal policies combined with lower energy prices. Additionally, it forecasts a decrease in Trkiye's budget deficit, while public debt is projected to remain at moderate levels.