” So far, so good. “ This could have been the title of the press release that the European Commission published on Friday, November 15, to present its new economic forecasts. Because although the experts of the community executive expect an improvement in the economic situation in Europe, they warn at the same time that the risks that weigh on these prospects are increasingly numerous.
Therefore, as things stand, the Commission forecasts that growth within the European Union (EU) will increase from 0.9% in 2024 to 1.5% in 2025 and 1.8% in 2026. Within euro area, gross domestic product (GDP) growth will reach 0.8% this year, before rising to 1.3% in 2025 and 1.6% in 2026. It is better, but we still cannot talk about sustained activity.
The EU’s three largest economies (Germany, France and Italy) continue to perform worse than the European average, down 0.1%, 1.1% and 0.7% respectively by 2024, when members are further east, with Poland in the lead (3%), they are doing much better. As for the five countries (Germany, Austria, Estonia, Finland and Ireland) that are in recession in 2024, they are expected to return to growth in 2025.
This renewed activity is explained, according to the Commission, by a gradual recovery in consumption and investments, in a context of falling inflation and interest rates. Still at 5.4% within the euro zone in 2023, the price index is expected to fall to 2.4% this year, 2.1% in 2025 and 1.9% in 2026.
Many dangers
Despite the announcements of factory closures at the end of October and beginning of November -Volkswagen in Germany or Michelin in France-, the Commission predicts that the labor market, which has withstood the multiple crises that Europe has gone through in recent years, will remain buoyant. In this context, the unemployment rate is expected to fall further in 2025, to 5.9% in the EU (compared to 6.1% in 2024) and 6.3% in the monetary union (6.5 %), before stabilizing.
Also on the public finance side, the outlook should improve: the budget deficit of the euro area countries should reach on average 3% of GDP in 2024, 2.9% in 2025 and 2.8% in 2026. In terms of finances, France would continue to have the worst performance in the euro zone, with a negative balance of 6.2% of national wealth this year, 5.3% in 2025 and 5.4% in 2026.
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