EU cuts eurozone GDP forecasts, says downside risks have increased

The European Commission has reduced its economic growth forecast for the eurozone next year, and warned that projections could be reduced further in the event of increased protectionist measures – such as those proposed by Donald Trump.

Eurozone GDP growth is expected to pick up to 1.3% in 2025, from an estimated 0.8% this year, slightly below the Commission's previous 1.4% forecast, according to the Autumn Forecast published on Friday

Growth is expected to accelerate next year as consumption picks up and investment rebounds, but the economy grew at a "subdued" pace in the second and third quarters of 2024.

Economic expansion is expected to be driven by domestic demand over the coming year, with exports and imports forecast to grow at broadly the same pace. However, uncertainty and downside risks to the outlook have increased, the Commission said.

"A further increase in protectionist measures by trading partners could upend global trade, weighing on the EU's highly open economy," the Autumn Forecast said.

The Commission also highlighted the Russia-Ukraine war and intensified conflict in the Middle East which have fuelled geopolitical risks and risks to energy security.

Meanwhile, policy uncertainty and structural challenges in the manufacturing sector "could entail further losses of competitiveness and weigh on growth and the labour market", it said.