Little by little, the European Union (EU) is emerging from stagnation. According to the European Commission's forecasts, published on Wednesday, May 15, growth should reach 1% this year and then rise to 1.6% in 2025, after having plateaued at 0.4% in 2023. For the eurozone, gross domestic product (GDP) should grow by 0.8% in 2024 and 1.4% in 2025.
Consumption alone accounts for this slight economic upturn, while tensions on the labor market, wage rises and receding inflation are bolstering citizens' purchasing power. According to experts in Brussels, this trend is set to continue. In the eurozone, prices are set to rise by 2.5% in 2024 and 2.1% in 2025, after soaring by 5.4% in 2023. As for the unemployment rate, close to its all-time low, this would reach 6.6% this year and 6.5 % in 2025.
For the rest, economic indicators, starting with investment, remain sluggish. Relatively high interest rates explain the private sector's reluctance to invest, particularly in construction, which is barely offset by public spending and Europe's €750 billion post-Covid stimulus package.
France and Italy lag behind
Germany's difficulties, its industry deprived of cheap Russian gas and which is exporting less as a result of the Chinese slowdown, are weighing heavily on Europe. The EU's leading economy's GDP is set to grow by 0.1% in 2024 and 1.0% in 2025, after contracting by 0.3% in 2023.
As for France and Italy, Europe's second and third-largest economies, they continue to lag behind the average of their neighbors, with both seeing growth of less than 1% this year and 1.5% in 2025.
If the Commission is banking on a recovery, it is likely to be a modest one, especially since these forecasts, as Paolo Gentiloni, the European commissioner for economic affairs, said, are "highly uncertain and – with two wars (...) not far from home – downside risks have increased."
In addition to geopolitical tension linked to the Israeli-Palestinian conflict and Russia's invasion of Ukraine, the European Central Bank's (ECB) economists have identified other risk factors. "The persistence of inflation in the US," they said, and a less significant ebb in price rises on the continent could lead the ECB to postpone rate cuts.
Budget cuts
What's more, in view of the deterioration in their public finances, several member states are likely to decide to make savings which, to date, are not – or not fully – taken into account in the European Commission's forecasts. These budgetary restraint measures could also weigh on future growth.
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