BRUSSELS – The Commission sharply reduced its economic GDP forecast for the EU on Monday, as it warned that heightened trade tensions and geopolitical uncertainty risk inflicting further damage on the bloc’s already weak economy.
Brussels now expects the EU’s GDP to grow by just 1.1% this year, down from the 1.5% expansion predicted in November. The 20-country euro area’s projected output was also cut from 1.3% to 0.9%.
The downgrade was mostly due to a steep reduction in the growth forecast for Germany, the EU’s largest economy, whose export-dependent industries are heavily exposed to global trade tensions, which soared following US President Donald Trump’s imposition of sweeping tariffs last month.
The German economy is now expected to stagnate this year, well below the 0.7% expansion forecast in November. France and Italy, the EU’s second and third-largest economies, also had their projected growth rates cut from 0.8% to 0.6% and 1% to 0.7% respectively.
Meanwhile, a boost in private consumption and “strengthening” investment caused Spain, the EU’s fourth-largest economy, to have its projected growth rate increased by 0.3 percentage points to 2.6%.
“As the world’s most open economy, the EU is feeling the strain,” said Maarten Verwey, the Commission’s director-general for economic and financial affairs.
Slower global growth “will inevitably drag on” the EU’s export-oriented industries, Verwey added, noting that “deteriorating sentiment” among citizens and companies is also hampering consumption and investment across the bloc.
Monday’s forecast follows Brussels’ repeated downgrades of Europe’s growth prospects over the past couple of years, as weak demand, a lack of investment, and rising competition from China have consistently had a greater-than-expected impact on the bloc’s economy.
European Commissioner for Economy Valdis Dombrovskis also noted on Monday that the “risks” to the EU’s economic outlook “remain tilted to the downside.”
However, he said that the bloc has shown “resilience amid high trade tensions and a surge in global uncertainty,” pointing to an expected rise in real wages and slowing inflation.
Headline inflation in the euro area is predicted to fall from 2.4% last year to 2.1% in 2025, Brussels said – the same as projected in November and only marginally above the European Central Bank’s 2% target rate.
The inflation outlook for 2026 was also cut from 1.9% to 1.7%, as a strengthening euro lowers the price of imports.
EU exporters are currently subject to a 25% US levy on cars, steel, and aluminium as well as a 10% baseline tariff on all other goods. The latter duty could rise to 20% in July when Trump’s suspension of so-called “reciprocal tariffs” on US trading partners is set to end.
The Commission’s forecast was originally set to be released on Friday but was delayed until Monday after the US and China slashed tariffs on each other’s goods by 115 percentage points each, forcing Brussels to revise its forecast.
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Source: www.euractiv.com
