ISSN 2443-8014 (online)

European
Economic
Forecast

Spring 2025

INSTITUTIONAL PAPER 318 | MAY 2025

EUROPEAN ECONOMY

Economic and
Financial Affairs
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European Commission
Directorate-General for Economic and Financial Affairs

European Economic Forecast

Spring 2025

EUROPEAN ECONOMY Institutional Paper 318

ABBREVIATIONS
Countries and regions
EU European Union
EA Euro area
BE Belgium
BG Bulgaria
CZ Czechia
DK Denmark
DE Germany
EE Estonia
IE Ireland
EL Greece
ES Spain
FR France
HR Croatia
IT Italy
CY Cyprus
LV Latvia
LT Lithuania
LU Luxembourg
HU Hungary
MT Malta
NL The Netherlands
AT Austria
PL Poland
PT Portugal
RO Romania
SI Slovenia
SK Slovakia
FI Finland
SE Sweden

BA Bosnia and Herzegovina

BR Brazil
CH Switzerland
CN China
IN India
IS Iceland
JP Japan
MD Moldova
NO Norway
MX Mexico
UA Ukraine
UK United Kingdom
US United States of America

AE Advanced economy
CEE Central and Eastern European
EFTA European Free Trade Association
EME Emerging markets economy
EMU Economic and Monetary Union
MENA Middle East and North Africa
ROW Rest of the World

iii
 Economic variables and institutions
CPI Consumer price index
ECB European Central Bank
EUI Economic Uncertainty Indicator
ESI Economic Sentiment Indicator
FAO Food and Agriculture Organization of the United Nations
FED Federal Reserve Bank
GDP Gross Domestic Product
GNI Gross National Income
HICP Harmonised Index of Consumer Prices
NEER Nominal Effective Exchange Rate
OPEC Organization of the Petroleum Exporting Countries
PMI Purchasing Managers’ Index
Other abbreviations
AF Autumn Forecast
APP ECB asset purchase programme
BCS Joint Harmonised EU Programme of Business and Consumer Surveys
COICOP Classification of individual consumption by purpose
COVID-19 Coronavirus disease 2019
DGSE Dynamic Stochastic General Equilibrium model
EUCAM European Union Commonly Agreed Methodology
GM European Commission's Global Multi-country model
NACE Statistical classification of economic activities in the European Community
NFC Non-financial corporation
NGEU NextGenerationEU
LNG Liquefied Natural Gas
PPP Purchasing power parity
RRF Recovery and Resilience Facility
RRP Recovery and Resilience Plan
SF Spring Forecast
SME Small and medium-sized enterprise
S&P GSCI Standard and Poor's Goldman Sachs Commodities Index
TFP Total factor productivity
TTF Title Transfer Facility
VAT Value-added tax
WiF Winter interim Forecast

Graphs/Tables/Units
bbl Barrel
bcm Billion cubic meters
bn Billion
bp. /bps. Basis point / points
euro/MWh Euro per megawatt hour
GW Giga Watt
lhs Left hand scale
mn Million
pp. / pps. Percentage point / points
pt. / pts. Point / points
Q Quarter
q-o-q% Quarter-on-quarter percentage change
rhs Right hand scale
tr Trillion
y-o-y% Year-on-year percentage change

iv
Currencies
EUR Euro
ALL Albanian lek
BAM Bosnian Mark
BGN Bulgarian lev
CZK Czech koruna
DKK Danish krone
GEL Georgian Lari
GBP Pound sterling
HUF Hungarian forint
ISK Icelandic krona
INR Indian rupee
MDL Moldovan Leu
MKD Macedonian denar
NOK Norwegian krone
PLN Polish zloty
RON New Romanian leu
RSD Serbian dinar
RUB Russian Ruble
SEK Swedish krona
CHF Swiss franc
JPY Japanese yen
CNY Chinese Yuan Renminbi
TRY Turkish lira
UAH Ukrainian hryvnia
USD US dollar

v
CONTENTS

Executive Summary 1

PART I: Economic outlook for EA and EU 7

1. Setting the scene 8
2. International environment 14
3. Financial conditions in the EU 21
4. Economic activity 29
5. Labour market 40
6. Inflation 45
7. External transactions 51
8. Public finances and the fiscal policy stance 55
9. Risks 59

PART II: Special Issues 61

1. The macroeconomic effect of US tariff hikes 63
2. Business adjustment to tensions in foreign markets and
drivers of consumers’ views on the economy: survey
evidence 74
3. The economic impact of higher defence spending 81

PART III: Prospects by individual economy 87

Euro Area Member States 89

1. Belgium 90
2. Germany 92
3. Estonia 94
4. Ireland 96
5. Greece 98
6. Spain 100
7. France 102
8. Croatia 104
9. Italy 106
10. Cyprus 108
11. Latvia 110
12. Lithuania 112
13. Luxembourg 114
14. Malta 116
15. The Netherlands 118
16. Austria 120
17. Portugal 122
18. Slovenia 124
19. Slovakia 126
20. Finland 128
Non-EA Member States 131
21. Bulgaria 132
22. Czechia 134

vii
 23. Denmark 136
24. Hungary 138
25. Poland 140
26. Romania 142
27. Sweden 144
Candidate Countries 147
28. Albania 148
29. Bosnia and Herzegovina 150
30. Georgia 152
31. Moldova 154
32. Montenegro 156
33. North Macedonia 158
34. Serbia 160
35. Türkiye 162
36. Ukraine 164
Other non-EU Countries 167
37. The United Kingdom 168
38. The United States 170
39. Japan 172
40. China 174
41. EFTA 176
42. Russian Federation 179
43. India 181

Statistical Annex 185

Previous European Economic Forecasts 223

LIST OF TABLES
1. Overview – the Spring 2025 Forecast 1
I.2.1. International environment 19
I.5.1. Labour market outlook - euro area and EU 44
I.6.1. Inflation outlook - euro area and EU 50
I.7.1. External position – euro area and EU 52
I.8.1. General government budgetary position - euro area and EU 58
II.1.1. Unilateral persistent US tariffs on imports 66
II.2.1. Factors and examples provided to respondents. 78

LIST OF GRAPHS
I.1.1. US effective tariff rate on imports 8
I.1.2. Global trade uncertainty 8
I.1.3. Volatility index, US 9
I.2.1. Global GDP growth 14
I.2.2. World PMIs 14
I.2.3. Exchange rates vs USD 16
I.2.4. 10-year government bond yields of major World economies 16
I.2.5. US imports by country of origin in 2024 16
I.2.6. Growth in global goods trade 18
I.2.7. Container shipping costs and supply-chain pressure index 18
I.2.8. Brent oil prices 20
I.2.9. TTF gas futures prices 20
I.2.10. Electricity futures prices 20
I.3.1. Short-term euro interest rate expectations 21
I.3.2. Yield curves in the euro area and the US 21
I.3.3. Euro area benchmark interest rate 22
I.3.4. Sovereign bond yields, US and Germany 23
I.3.5. Market-based inflation expectations 23
I.3.6. Equity markets 24
I.3.7. Corporate spreads over German 5-y sovereign bonds 24
I.3.8. Financial stress indicators 24
I.3.9. Corporate market funding 24
I.4.1. Real GDP growth and its demand contributions, EU 29
I.4.2. Demand side components, EU excl. IE 29
I.4.3. Sources and use of real disposable income of households 30
I.4.4. Consumer confidence, EU 30
I.4.5. Investment contribution to GDP growth, EU 31
I.4.6. Gross value added in the EU across sectors 32
I.4.7. Short-term indicators, EU 33
I.4.8. ESI/Confidence and PMI, euro area 34
I.4.9. Growth dispersion and convergence 34
I.4.10. Output gaps across Member States 35
I.5.1. Employment growth by sector and by period, EU 40
I.5.2. Job vacancy rate by sector, EU 41
I.5.3. Labour market indicators, EU 41
I.5.4. Hours worked per employee by sectors 41
I.5.5. Compensation per employee and HICP inflation in 2024 across
Member States 42
I.5.6. Employment growth and unemployment rate 43
I.5.7. Job intensity of the economic growth and labour productivity 43
I.5.8. Unemployment rates across Member States, 2024 compared to
2019 and 2026 44
I.6.1. Inflation breakdown, euro area 45
I.6.2. Energy commodity prices and inflation in the euro area 45
I.6.3. Inflationary pressures, euro area 46
I.6.4. Services inflation, euro area 47
I.6.5. HICP excluding energy and food, and a range for 20 alternative
underlying inflation indicators in the euro area 47
I.6.6. Selling price expectations, euro area 48
I.6.7. Inflation breakdown, EU 49
I.6.8. Decomposition of the annual growth in GDP deflator, EU 49
I.6.9. Range of annual HICP inflation rates in EU Member States 50
I.6.10. Cumulative HICP excl energy and food inflation and wage growth
2025-2026 50
I.7.1. Merchandise balance, volume and terms of trade effects 51
I.7.2. Merchandise balance 51
I.7.3. Services balance by sector (BOP), EU 51
I.7.4. Current account balance, EU 52
I.8.1. Drivers of the change in general government balance, EU 55
I.8.2. General government balance developments across Member States 55
I.8.3. Expenditure and revenue contributions to the change of general
government balance, EU 56
I.8.4. Public investment in the EU 56
I.8.5. Drivers of change in the debt-to-GDP ratio, EU 57

ix
 I.8.6. Debt developments across Member States 57
I.8.7. Fiscal stance and its components, EU 58
I.8.8. Fiscal stance across Member States, 2025 58
II.1.1. Unilateral US tariffs on imports 64
II.1.2. Export decomposition (unilateral US tariffs on imports) 65
II.1.3. Macroeconomic effects on the EU and the US under unilateral
tariffs and retaliations. 67
II.1.4. Macroeconomic effects on the EU and the US with unilateral tariff
and risk premium shocks. 68
II.2.1. Intention to adjust strategy, by sector 75
II.2.2. The adjustments are or will be of the following nature, per sector 75
II.2.3. Effect on production and final prices 77
II.2.4. EU estimate (*) - Consumer confidence and component
contributions (mean adjusted) 77
II.2.5. EU estimate results 78
II.2.6. Impact of the different factors by age group - percentage balance 79
II.2.7. Factor ''labour market'' - percentage balance 79
II.2.8. Factor ''technological change'' - percentage balance 79
II.3.1. The evolution of EU defence expenditure and its composition 82
II.3.2. EU defence expenditures by Member States in 2023 83
II.3.3. The impact of higher defence spending on real GDP and general
government debt in the EU 84

LIST OF BOXES
I.1.1. Technical elements and general assumptions behind the forecast 11
I.3.1. Signals of a turnaround in the housing market 26
I.4.1. The potential economic impact of the reform of Germany’s fiscal
framework 36
I.4.2. The impact of interest rate changes on euro area households' net
interest income 37
I.7.1. What do different data sources reveal about the EU’s export
performance? 53
II.1.1. EU-US trade relationship through the lens of global value chains 69
FOREWORD

The world was largely unprepared for the abrupt shift in US trade policy. The sweeping tariff hikes
announced on 2 April sent shockwaves through the global economy. The swift response by
financial markets prompted a suspension in their application, but the uncertainty unleashed by an
unpredictable US trade policy will not subside in the near term and weighs heavily on the global
outlook. The escalation of the standoff between the US and China adds to the damage. The
agreement reached on 12 May to partially roll back tariffs is a positive development. However,
tariffs remain elevated and will inevitably result in a gradual unwinding of US-Chinese trade flows.
As the world’s most open economy, the EU is feeling the strain. Weaker economic expansion in
global markets will inevitably drag on export growth. Survey data already point to deteriorating
sentiment among households and businesses—who are thus likely to respond by curbing
consumption and deferring investment.
Crucially, the current geoeconomic challenges highlight not just vulnerabilities of our economy, but
also its solid economic fundamentals and institutional strengths. The EU’s consistent support for a
rules-based international order is reinforcing its pivotal role in global trade. At the same time, the
credibility of EU institutions and the resilience of its financial system are enhancing the global
appeal of euro-denominated assets in times of high volatility.
Extending and deepening our network of trade partnerships is more important than ever. It will
help diversify trade flows and bolster resilience—and is also key to enhancing the EU’s
attractiveness as a base for firms seeking reliable access to global markets.
To fully reap the benefits of increased investor interest, the EU must move forward decisively on
its capital markets’ integration. But capital inflows only become an economic engine when
channelled into productive investment. This in turn requires unlocking the growth potential of the
Single Market: ensuring it is fit for today’s drivers of growth and aligned with EU geopolitical,
technological, and environmental strategic objectives.
The road ahead will be testing. But in a more uncertain, fragmented and volatile world, the EU still
holds a strong hand. Let’s make sure we play it well.

Director General
Economic and Financial Affairs

xi
MODERATE GROWTH AMID GLOBAL TRADE UNCERTAINTY

EXECUTIVE SUMMARY

The EU growth outlook This Spring Forecast projects real GDP growth in 2025 at 1.1% in the
has deteriorated, while EU and 0.9% in the euro area– broadly the same rates attained in
inflation decelerates more 2024. This represents a considerable downgrade compared to the
swiftly. Autumn 2024 Forecast (AF24), largely due to the impact of increased
tariffs and the heightened uncertainty caused by the recent abrupt
changes in US trade policy and the unpredictability of the tariffs’ final
configuration. Despite these challenges, EU growth is expected to rise
to 1.5% in 2026, supported by continued consumption growth and a
rebound of investment. Growth in the euro area is projected to reach
1.4% in 2026. Disinflation is anticipated to proceed more swiftly than
expected in autumn, with new disinflationary factors from ongoing
trade tensions outweighing higher food prices and stronger short-term
demand pressures. After averaging 2.4% in 2024, headline inflation in
the euro area is expected to meet the ECB target by mid-2025—earlier
than previously anticipated—and to average 1.7% in 2026. Starting
from a higher level in 2024, inflation in the EU is projected to continue
easing to 1.9% in 2026.
The EU economy started In the fourth quarter of last year, the EU economy grew by 0.4%,
the year on a slightly slightly surpassing the autumn projections. For the entire year, GDP
stronger footing than growth reached 1.0%. The volume of government consumption
expected. expanded vigorously and provided a larger-than-expected contribution
to EU growth, mainly through employment growth in the government
sector. Growth in private consumption also exceeded expectations
Table 1: Overview – the Spring 2025 Forecast

Unemployment
Real GDP Inflation Current account Budget balance
rate
2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026
Belgium 1.0 0.8 0.9 4.3 2.8 1.8 5.7 6.1 5.8 -0.2 -0.7 -1.0 -4.5 -5.4 -5.5

Germany -0.2 0.0 1.1 2.5 2.4 1.9 3.4 3.6 3.3 6.1 5.3 5.3 -2.8 -2.7 -2.9

Estonia -0.3 1.1 2.3 3.7 3.8 2.3 7.6 7.6 7.3 -2.0 -2.1 -2.0 -1.5 -1.4 -2.4

Ireland 1.2 3.4 2.5 1.3 1.6 1.4 4.3 4.3 4.4 17.0 12.6 11.6 4.3 0.7 0.1

Greece 2.3 2.3 2.2 3.0 2.8 2.3 10.1 9.3 8.7 -8.3 -8.2 -7.9 1.3 0.7 1.4

Spain 3.2 2.6 2.0 2.9 2.3 1.9 11.4 10.4 9.9 3.1 2.7 2.8 -3.2 -2.8 -2.5

France 1.2 0.6 1.3 2.3 0.9 1.2 7.4 7.9 7.8 -0.9 -0.6 -0.6 -5.8 -5.6 -5.7

Croatia 3.9 3.2 2.9 4.0 3.4 2.0 5.0 4.6 4.5 -0.7 -1.1 -1.1 -2.4 -2.7 -2.6

Italy 0.7 0.7 0.9 1.1 1.8 1.5 6.5 5.9 5.9 0.9 1.3 1.6 -3.4 -3.3 -2.9

Cyprus 3.4 3.0 2.5 2.3 2.0 2.0 4.9 4.7 4.6 -7.0 -6.5 -5.9 4.3 3.5 3.4

Latvia -0.4 0.5 2.0 1.3 3.0 1.7 6.9 6.8 6.6 -3.3 -3.9 -3.5 -1.8 -3.1 -3.1

Lithuania 2.8 2.8 3.1 0.9 2.6 1.2 7.1 6.8 6.6 2.6 2.0 1.9 -1.3 -2.3 -2.3

Luxembourg 1.0 1.7 2.0 2.3 2.1 1.8 6.4 6.6 6.4 2.3 0.8 0.3 1.0 -0.4 -0.5

Malta 6.0 4.1 4.0 2.4 2.2 2.1 3.1 3.1 3.1 3.6 3.7 3.4 -3.7 -3.2 -2.8

Netherlands 1.0 1.3 1.2 3.2 3.0 2.0 3.7 3.9 4.0 10.0 10.2 10.6 -0.9 -2.1 -2.7

Austria -1.2 -0.3 1.0 2.9 2.9 2.1 5.2 5.3 5.2 2.0 2.4 2.3 -4.7 -4.4 -4.2

Portugal 1.9 1.8 2.2 2.7 2.1 2.0 6.5 6.4 6.3 1.7 1.2 0.9 0.7 0.1 -0.6

Slovenia 1.6 2.0 2.4 2.0 2.1 1.9 3.7 3.7 3.8 4.6 4.7 4.8 -0.9 -1.3 -1.5

Slovakia 2.1 1.5 1.4 3.2 4.0 2.9 5.3 5.3 5.3 -1.6 -2.3 -2.5 -5.3 -4.9 -5.1

Finland -0.1 1.0 1.3 1.0 1.7 1.5 8.4 8.6 8.3 -0.8 -0.7 -0.7 -4.4 -3.7 -3.4

Euro area 0.9 0.9 1.4 2.4 2.1 1.7 6.4 6.3 6.1 3.3 3.0 3.0 -3.1 -3.2 -3.3

Bulgaria 2.8 2.0 2.1 2.6 3.6 1.8 4.2 4.0 3.8 -0.8 -1.1 -1.0 -3.0 -2.8 -2.8

Czechia 1.1 1.9 2.1 2.7 2.2 2.0 2.6 2.6 2.6 1.2 0.8 0.5 -2.2 -2.3 -2.2

Denmark 3.7 3.6 2.0 1.3 1.6 1.5 6.2 6.2 6.3 13.0 13.7 13.5 4.5 1.5 0.6

Hungary 0.5 0.8 2.5 3.7 4.1 3.3 4.5 4.4 4.3 2.4 2.0 1.5 -4.9 -4.6 -4.7

Poland 2.9 3.3 3.0 3.7 3.6 2.8 2.9 2.8 2.8 0.2 1.0 0.7 -6.6 -6.4 -6.1

Romania 0.8 1.4 2.2 5.8 5.1 3.9 5.4 5.3 5.2 -8.5 -7.9 -7.0 -9.3 -8.6 -8.4

Sweden 1.0 1.1 1.9 2.0 2.2 1.6 8.4 8.7 8.4 7.0 6.8 7.0 -1.5 -1.5 -0.8

EU 1.0 1.1 1.5 2.6 2.3 1.9 5.9 5.9 5.7 3.2 3.0 3.0 -3.2 -3.3 -3.4

1
European Economic Forecast, Spring 2025

towards the end of the year, driven by solid increases in disposable

income as the economy added over 1.7 million jobs, and nominal
wages recovered the purchasing power lost to surging inflation. Despite
a minor rise in the saving rate (from a still high level), consumption
expanded by 1.3%. Net exports also bolstered growth, buoyed by a
robust rise in services exports. The EU's economic expansion continued
in the first quarter, with real GDP growth increasing by 0.3%. However,
investment fell short of expectations due to high financing costs and
already high economic policy uncertainty. The considerable contraction
in equipment investment and residential construction was only partially
offset by infrastructure investment. High frequency data and partial
information from national sources point to a relatively strong
performance of consumption, non-residential construction and exports.
High uncertainty Since its inception, the US administration has announced a series of
surrounding the landing tariffs, culminating on 2 April in sizeable tariffs on imports from
zone for the tariffs virtually all US trading partners. Following fierce market reactions, the
requires technical tariffs were suspended on 9 April, accompanied by a number of carve-
assumptions. outs and exemptions for specific sectors and products. Nonetheless,
trade tensions with China escalated when China retaliated. By the cut-
off date of this forecast, US tariffs on Chinese imports stood at 145%,
while Chinese tariffs on US goods were 125%. Given the high
uncertainty on how the tariffs will eventually be implemented—i.e.
affecting which countries or products, their duration, possible
exemptions, and retaliatory actions—economic forecasts must rely on
working assumptions. This forecast assumes that the high tariffs
announced on 2 April will not be reinstated and that US tariffs on
imports from the EU and nearly all other countries will stay at 10%
(the level generally applied on 9 April), except for higher tariffs on
steel, aluminium, and cars (25%), and exemptions on some products
like pharmaceuticals and microprocessors. This technical assumption
hinges upon the customary no-policy change assumption underpinning
the European Economic Forecasts, in the sense that the pledged
reinstatement of the tariffs announced on 2 April does not appear
credible, if anything because it is conditional upon the outcomes of
bilateral negotiations with the trade partners, which cannot be
anticipated. Moreover, the baseline projections do not include any
retaliatory tariffs by the EU. Finally, the forecast assumes a significant
reduction in trade flows between the US and China, even though at
tariff rates significantly lower than those in effect at the cut-off date,
which were not assessed as tenable. The suspension of the high
bilateral tariffs agreed on 12 May vindicates this assessment.
Trade tensions dampen In 2024, stronger-than-expected growth in China and robust
the global growth and performance in the US pushed global growth (excluding the EU) to
trade outlook, but also 3.6%. Looking ahead, growth momentum is expected to weaken. Global
commodity prices. growth outside the EU is projected at 3.2% for both 2025 and 2026,
below the 3.6% anticipated in autumn. Although trade growth remained
robust in the first quarter of 2025, likely due to advance purchases
ahead of tariffs, global trade (outside the EU) is expected to expand at
a rate well below global economic activity over the forecast horizon.
Weakening global demand weighs heavily on energy commodity prices,
especially in a context of expanding oil production. By the cut-off date
of this forecast, Brent oil prices hovered just above $60 per barrel—a
notable 10% drop from the futures price for the second quarter of
2025 observed last autumn. TTF gas prices saw similar declines.

2
 Executive Summary

Lower external demand EU exports are expected to grow by a modest 0.7% this year and 2.1%
for EU goods detracts in 2026, in line with the lower global demand for goods. This marks a
from economic growth. significant downward revision from the autumn projections (at 2.2%
and 3.0%, respectively). Weakness in exports is amplified by
competitiveness losses, as well as heightened trade uncertainty.
Although EU firms are adapting their trade strategies in response to
geopolitical tensions and trade fragmentation (see Special Issue 2),
many might hesitate to bear the high fixed costs associated with e.g.
product adaptation, regulatory compliance, and finding new distribution
networks, necessary to enter new export markets. Growth in imports
was also revised down, in line with lower export growth and weaker
domestic demand, although the re-routing of some Chinese exports
and the euro's appreciation lend some support to import growth.
Consequently, in 2025, net external demand is set to subtract nearly
0.5% from growth, but this drag is expected to fade in 2026. Despite
adverse trade volume developments, the sharp drop in energy
commodity prices, cheaper industrial goods imports, and a stronger
currency will enhance the terms of trade further. These movements in
terms of trade help maintain a largely unchanged inflow of income
from the rest of the world. As a result, the current account surplus is
expected to fall only slightly from 4.4% of GDP in 2024 to 4.2% in both
succeeding years.
Elevated uncertainty and a Following a 1.9% contraction in 2024, gross fixed capital formation is
tightening of financial expected to expand over the forecast horizon. With a growth rate of
conditions exert a drag on 1.5% in 2025 and 2.4% in 2026, the expected rebound and
investment growth. acceleration are significantly less pronounced than projected in
autumn. Depressed capacity utilization lowers investment needs, while
uncertainty heightens the option value of deferring investment.
Moreover, despite ongoing easing of monetary policy, the adverse and
volatile market response to trade tensions negatively affect financing
conditions. In the first quarter, banks reported some tightening of credit
standards—even before the financial turmoil of early April. While
corporate bond spreads narrowed again after the suspension of tariffs,
longer-term interest rates remain above their level in the AF24.
Equipment investment is expected to be disproportionately affected by
this challenging environment, barely expanding this year and only
modestly picking up in 2026. After contracting for two years,
residential construction is poised to recover in 2025 and enter more
vigorous expansion in 2026. Conditions for households appear slightly
more favourable than for corporates. Infrastructure, as well as R&D
investment, are set to expand more vigorously—partly supported by
RRF and the deep digital transformation needs of businesses.
Labour markets remain The modest GDP growth achieved in 2024 still led to further
resilient and real wages employment expansion. The job intensity of growth has begun to
expand further. decline from high levels and is expected to normalize further over the
forecast horizon, with employment expanding by about 1%
cumulatively over 2025 and 2026—slightly less than the autumn
projection, but still adding 2 million jobs. As the labour force expands
more modestly, the EU unemployment rate is projected to decline to a
new historic low of 5.7% in 2026. Tight labour markets and improving
productivity are set to drive further wage growth. After increasing by
5.3% in 2024, growth in nominal compensation per employee is
expected to slow to 3.9% in 2025 and 3.0% in 2026. On aggregate in
the EU, this year, real wages should fully recover the purchasing power

3
European Economic Forecast, Spring 2025

losses accrued since mid-2021, though in a few Member States the

recovery in real wages is still lagging behind.
Consumption continues to Continued gains in employment and wages, along with decelerating
expand, though it remains inflation and a slight decline in net interest payments (see Box I.4.2),
constrained by a still support a further increase in household gross disposable income.
elevated saving rate. However, the drop in consumer confidence in March, and more
markedly in April, suggests that consumption might continue to be
restrained by precautionary saving motives. This is in addition to
efforts to rebuild wealth buffers eroded by inflation and a decline in
real estate valuations (see Box I.3.1). Consequently, the saving rate is
expected to decline more gradually than previously thought, from
14.8% in 2024 to 14.2% in 2026. Real private consumption is forecast
to grow by 1.5% this year, with a strengthening anticipated in 2026. In
contrast, growth of public consumption is projected to slow to 1.7% in
2025 and, under the customary no-policy-change assumption, to
decelerate further to 1.3% by the forecast's final year.
Inflation is set to return to Several factors exert downward pressure on EU inflation. First,
target already in 2025 significantly lower energy commodity prices and downward-sloping
and fall below 2% in forward curves are driving consumer energy inflation into negative
2026, while monetary territory this and next year. Second, as the trade relationship between
policy turns neutral. the US and China unwinds, competitive pressures on non-energy
industrial goods in the EU are intensifying, leading to a decrease in this
component's inflation. Third, the appreciation of the euro and other EU
currencies amplifies disinflationary pressures on imported commodities
and goods. These forces are partially offset by higher inflation in food
and services. Headline inflation in the euro area is expected to decrease
from 2.4% in 2024 to an average of 2.1% in 2025 and 1.7% in 2026.
In the EU, inflation is set to follow similar dynamics, dropping from a
slightly higher rate in 2024 to 1.9% in 2026. Underlying price pressures
remain somewhat sustained but broadly consistent with the headline
target. As disinflationary pressures intensify, markets anticipate a
marginally looser monetary policy over the forecast horizon. Based on
market pricing, policy rates are expected to reach the lower end of the
1.75%-2.25% range that the ECB considers neutral.
The fiscal stance is also Following a slightly contractionary fiscal stance in 2024, the forecast
set to turn broadly neutral suggests that the fiscal stance will turn broadly neutral in 2025 on
in 2025 average in both the EU and the euro area. For 2026, the no-policy-
change forecast continues to indicate a neutral fiscal stance. After
falling to 3.2% of GDP (3.1% of GDP in the euro area) in 2024, the EU
general government deficit is anticipated to rise by more than 0.1
percentage points in 2025 and only marginally in 2026, reaching 3.4%
of GDP in 2026 (3.3% in the euro area). Eleven Member States
reported a deficit exceeding 3% of GDP in 2024, and this figure is
projected to decrease to nine by 2026. After stabilizing in 2024 at
around 82% (89% in the euro area), the debt ratio is expected to edge
up to about 84.5% of GDP in 2026 (91% in the euro area), with five
Member States exceeding a 100% debt ratio. This modest increase is
attributed to a less favourable interest-growth-rate differential,
alongside significant stock-flow adjustments. The impact of activating
the National Escape Clause of the Stability and Growth Pact, providing
flexibility for higher defence expenditure over 2025-2028, is not yet
fully visible in this forecast (see Special Issue 3). While by the cut-off
date of the forecast a majority of Member States had requested its
activation, their defence spending plans were not specified enough to

4
 Executive Summary

be included in the baseline projections. The same applies to the

German parliament's decision to boost defence and investment
spending (see Box I.4.1).
Risks to the outlook are An escalation of trade tensions between the EU and the US could
tilted to the downside depress GDP and rekindle inflationary pressures. Intensified trade
tensions between the US and other major trading partners could also
have ripple effects on the EU economy (see Special Issue 1). Recent
market stress episodes have highlighted the potential for contagion
from non-bank financial institutions, which—if affecting the banking
sector—could impair credit flows. Persistent inflation in the US,
potentially due to tariff-induced supply shocks, might compel the
Federal Reserve Bank to tighten monetary policy again, leading to
adverse spillovers on global financial conditions and EU external
demand. On the upside, the trade deal between the US and China
agreed on 12 May, which set tariffs significantly lower than assumed
in this forecast, can be seen as a positive upside risk to the baseline
projections, though possibly weakening some of the disinflationary
pressures. A reduction in EU-US trade tensions, along with renewed
momentum in trade negotiations with other countries and regions,
would support EU growth Moreover, external headwinds could prompt
faster progress on EU structural reforms, especially in the Single
Market and the Savings and Investment Union. Germany’s planned
increase in infrastructure and defence spending could support
economic activity, lifting growth in Germany and in the EU (see Box
I.4.1). Additional defence spending, leveraging on the Stability and
Growth Pact's flexibility, might also stimulate economic activity—albeit
as a secondary benefit to the primary goal of enhanced security for the
EU as a whole (see Special Issue 3). Lastly, the increasing frequency of
climate-related disasters underscores a persistent downside risk.
Without stronger climate adaptation and mitigation efforts, the
economic and fiscal costs of such events are likely to rise, further
undermining resilience and growth.

5
PART I
Economic outlook for EA and EU
 1. SETTING THE SCENE

The EU economy ended 2024 on a stronger footing than anticipated, and the stage
seemed set for a gradual acceleration in economic activity. Real GDP growth in the fourth
quarter of 2024 turned out slightly better than expected, and data revisions for earlier quarters
were positive too. As a result, activity is now reported to have expanded by 1% in 2024 — a
modest pace, but a welcome shift after the stagnation of the previous year. With the gradual
easing of restrictive monetary policy, financing costs were expected to fall further. Continued
tightness in the labour market was set to support further gains in nominal compensation per
employee, allowing real wages to recover all purchasing power losses incurred since end-2021 by
2025 — and continue growing thereafter. Private-sector balance sheets remained sound, offering
a solid foundation for renewed investment. On the fiscal side, governments were progressing along
a path of slow but steady consolidation. On the external front, world imports were forecast to
expand steadily, supported by a rebound in goods trade and continued resilience in services.
Yet, in early 2025 the EU and global economies were hit by the most significant policy-
induced trade and economic uncertainty shock in decades. The first months of the Trump
administration, which took office in January 2025, saw a wave of executive orders raising tariffs
on goods imports from an expanding list of countries and products. Framed as actions to hold
Mexico and Canada accountable for drug trafficking and illegal immigration, the US imposed 25%
tariffs on goods deemed non-compliant with the US-Mexico-Canada Agreement (USMCA). This was
followed by 25% tariffs on steel, aluminium, automobiles and auto parts from all countries —
hitting producers in the EU, Japan, Korea and North America. On 2 April, the US introduced a 10%
baseline tariff on most imports, along with higher duties on countries with which it runs the largest
trade deficits. The EU faced tariffs of up to 20%, while some smaller economies in Africa and Asia
were hit even harder, while tariffs on Chinese goods increased to 54%. As a result, the effective US
tariff rate surged to levels unseen since the early 20 th century (see Graph I.1.1). The unpredictable
and seemingly arbitrary nature of these measures pushed trade policy uncertainty to record highs,
comparable only to levels seen during the COVID-19 pandemic and the global financial crisis (see
Graph I.1.2).
Graph I.1.1: US effective tariff rate on imports Graph I.1.2: Global trade uncertainty

30 % 600 Index Index 200

180
25 500
160
140
400
20 120
300 100
15 80
200
60
10
40
100
20
5
0 0
00 02 04 06 08 10 12 14 16 18 20 22 24
0
Trade policy uncertainty
1924

2004
1900
1908
1916

1932
1940
1948
1956
1964
1972
1980
1988
1996

2012
2020

World Trade Uncertainty Index (rhs)

Source: Bureau of Economic Analysis, The Budget Lab analysis. Source: worlduncertaintyindex.com

The US tariffs announcements caught markets by surprise, forcing a swift recalibration

of growth expectations and a repricing of assets. US equity markets, which had rallied after
the November 2024 elections and peaked shortly after the January inauguration, started declining
after mid-February and dropped sharply following the 2 April announcement. The Nasdaq,
previously leading the gains, was among the hardest hit. Yields on 10-year US Treasuries, which
had risen until mid-January, started falling as concerns over US growth mounted. But on 2 April the

8
 Economic outlook for EA and EU

10-year yield suddenly reversed course, increasing by some 50 basis points in less than one week.
The dollar, which had also initially strengthened on expectations of stronger growth, also reversed
course in mid-February, and losses accelerated after the April tariff announcement, fully erasing
the earlier appreciation. This unusual combination of rising yields and a depreciating dollar was
widely read as a loss of confidence in US policy credibility. Risk premia widened across asset
classes. Commodity prices — especially oil and industrial metals — also declined amid fears of
weakening global trade. In Europe, equity indices followed suit, while sovereign yields edged down
as capital moved out of the US and into bond markets in the EU and other advanced economies.
Yields and stock indices also declined in other major economies, including Japan and the UK.
Following fierce market reactions, on 9 April Graph I.1.3: Volatility index, US
the US administration suspended
“reciprocal” tariff rates, and additional 60 Index
carve-outs were granted in the following 50
days. The backlash forced the US administration
to backtrack on its “reciprocal tariffs”. However, 40
the 10% minimum tariff and the 25% sector-
specific tariffs remain in place. At the same time, 30
the administration escalated trade tensions with
20
China — raising baseline tariffs on Chinese
imports in waves, from 10% in February to 145% 10
at the cut-off date of this forecast. China
responded with tariffs on US farm goods, 0
Jan-23 Jul-23 Jan-24 Jul-24 Jan-25
regulatory pressure on American firms, and 125%
tariffs on US imports. After the initial turbulence
in early April, market volatility remained high and Source: CBOE.
sentiment fragile, as uncertainty over US trade
policy persisted (see Graph I.1.3). While equity markets rebounded — recovering most of their post-
2 April losses and returning by early May to levels close to those at the start of April — the
recovery did not extend to bond yields or the dollar. Ten-year Treasury yields remained below post-
election highs, and the dollar stayed weak in nominal trade-weighted terms.
The uncertainty surrounding the tariff regime prevailing over the forecast horizon
forces this forecast to rely on technical assumptions. The situation remains fluid and still
subject to policy shifts, thus necessitating the use of ad hoc technical assumptions. These are
detailed in the Box I.1.1 together with other technical assumptions. Importantly, the individualised
“reciprocal” higher tariffs are assumed to not be reinstated at the expiry of the 90 days
suspension. The forecast also assumes that the exceptionally high tariffs on Chinese imports,
imposed after 2 April, will be scaled back to pre-escalation levels, as they are deemed
unsustainable. Nevertheless, based on the stated US policy objective of reducing its merchandise
trade deficit with China, the forecast assumes a 20% drop in bilateral merchandise trade in 2025,
followed by another 20% in 2026 compared to 2024 levels. Developments after the cut-off date
largely support this approach: on 12 May, the US and China agreed to substantially roll back
tariffs. At the time of publication, the new tariffs in place are lower than those assumed at the cut-
off. The possible extension of the new tariffs agreed on 12 May over the whole forecast horizon is
an upside risk to our global growth forecast. Still, two factors warrant caution. First, the agreement
only temporarily lowers tariffs. There is still considerable uncertainty about the final outcome of
the negotiations and the risk of renewed escalation persists if talks were to break down. Second,
the tariffs in place — 30% on Chinese exports to the US and 10% on US exports to China — remain
significantly higher than pre-escalation levels and are still set to result in an unwinding of the US-
China trade relationship.
Beyond trade, broader geopolitical tensions remain elevated, reinforcing uncertainty,
weighing on confidence, and posing significant risks to the economic outlook. Security
concerns have intensified, as the war in Ukraine continues without signs of resolution. Despite
efforts involving the US, the EU or individual Member States, Russia and Ukraine, a durable peace
agreement offering sufficient guarantees to Ukraine and the EU remains elusive. Meanwhile, the

9
 European Economic Forecast, Spring 2025

Middle East remains unstable. Besides the intolerable human toll it is causing, it poses continued
risks of abrupt repricing in energy markets. Adding to the sense of insecurity, contradictory signals
from the US regarding its NATO commitments have heightened EU security concerns. Against this
backdrop, the urgency to bolster defence capabilities has come to the fore. The Readiness 2030
package, presented by the European Commission in March, aims to support Europe’s defence
industry, deepen the single defence market, and enable an increase in defence spending —
including, where needed, through the activation of the Stability and Growth Pact’s national escape
clause in a coordinated manner. By the forecast cut-off date, Member States had requested this
activation, but their defence spending plans remained insufficiently detailed to be included in the
baseline. The same applies to the German parliament’s decision to boost defence and investment
spending.

10
 Economic outlook for EA and EU

Box I.1.1: Technical elements and general assumptions behind the forecast

This box details the technical and ad hoc assumptions underlying this forecast. The cut-off date for
taking information into account in this European Economic Forecast was 30 April 2025.
1. Technical elements behind the forecast

Exchange and interest rates

Nominal exchange rates are kept constant over the forecast horizon at the level recorded during the
reference period between 14 and 25 April 2025 (see Table 1 in this box and Table 31 in the Statistical
Annex) (1). All interest rate assumptions are derived from implicit market rates, thus fully reflecting
market expectations at the time of the forecast. The assumptions for short-term interest rates for euro
area Member States are derived from the average level during the reference period of three-month
EURIBOR futures contracts over the forecast horizon. In the absence of future contracts, the
assumptions for short-term rates of non-euro area Member States and countries outside EU are
derived from the average level over the reference period of the implicit forward three-month OIS
(overnight indexed swap) rates, corrected for the average spread over the reference period between
the three-month EURIBOR rate and the OIS swap rate with a similar maturity (i.e. three-month). The
assumptions for long-term interest rates for the euro area Member States are derived from the
average forward sovereign rates over the reference period, when available. Forward sovereign rates
are also used, when available, to derive assumptions for long-term interest rates of the other EU
Member States as well as of the countries outside EU examined in the forecast (2).
Commodity prices

Assumptions for Brent oil, gas and electricity prices are based on futures markets, using the average
over the 10-day reference period between 14 and 25 April.
Trade policies and assumptions

For trade policy, this forecast pencils in only the measures that have been implemented until the cut-
off date and includes bans on specific exports and imports (see https://eu-solidarity-
ukraine.ec.europa.eu/eu-sanctions-against-russia-following-invasion-ukraine_en).

Table 1: Technical assumptions

Spring 2025 Autumn 2024
Forecast Forecast
2023 2024 2025 2026 2024 2025 2026
3-month EURIBOR (percentage per annum) 3.4 3.6 2.0 1.7 3.5 2.1 2.0
10-year government bond yields (percentage per annum) (a) 2.4 2.3 2.5 2.7 2.3 2.3 2.4
USD/EUR exchange rate 1.08 1.08 1.11 1.13 1.09 1.08 1.08
GBP/EUR exchange rate 0.9 0.8 0.9 0.9 0.8 0.8 0.8
RMB/EUR exchange rate 7.66 7.79 8.12 8.29 7.80 7.72 7.72
JPY/EUR exchange rate 151.8 163.9 161.6 162.0 163.9 163.3 163.3
EUR nominal effective exchange rate (annual percentage change) (b) 6.98 2.95 3.72 1.38 2.95 3.72 1.38
Natural gas (EUR/Mwh) (c) 41.4 34.6 38.1 32.6 33.9 39.8 34.8
Electricity (EUR/Mwh) (d) 102.1 76.3 82.8 78.6 72.2 86.4 81.6
Oil price (USD per barrel) 82.5 80.5 67.7 64.0 80.7 73.1 71.5
Oil price (EUR per barrel) 76.3 74.4 60.8 56.4 74.2 67.4 65.9
(a) 10-year government bond yields for the euro area are the German government bond yields. (b) 42 industrial countries EU-27, TR CH NO US UK CA JP AU MX NZ KO CN HK RU
BR. (c) ICE Dutch TTF. (d) GDP - weighted average of electricity prices in DE, FR, IT, ES, NL, BE, AT.

(1)
Given the importance of Türkiye as EU trading partner, an exception to the constant nominal-exchange rate
assumptions was made for all bilateral exchange rates of the Turkish lira, due to the outlook of persistently
high inflation in the country. The nominal exchange rate of the Turkish lira vis-à-vis the EUR is assumed to be
35.57 in 2024, 42.01 in 2025 and 43.3 in 2026.
(2)
When forward sovereign rates are not available, the assumptions are derived from forward swap rates (i.e.
Russia and Iceland), corrected in a similar way as for short-term interest rates. For countries where no market
instrument is available (i.e. forwards), a fixed spread is added to the relevant interest rate assumptions for the
euro area (i.e. the difference between the country short or long term rates and the three-month EURIBOR rate
for the short-term rate and the 10-year German sovereign rate for the long-term rate), based on the monthly
average of the country short- or long-term benchmark rates.

(Continued on the next page)

11
 European Economic Forecast, Spring 2025

Box (continued)

ESA 2010

The forecast is based on the ESA 2010 system of national accounts for all Member States, the EU and
the euro area aggregates.

Calendar effects on GDP growth and output gaps

The number of working days may differ from one year to another. The Commission’s annual GDP
forecasts are not adjusted for the number of working days, but quarterly forecasts are. The working-
day effect in the EU and the euro area is estimated to be limited over the forecast horizon, implying
that adjusted and unadjusted annual growth rates differ slightly (about -0.1pps. in 2025 and around
0.1pps. in 2026), though it may be significant in the case of some Member States. Since the working-
day effect is considered temporary, it is not incorporated in the estimates of potential GDP and output
gaps.
EGR: Net expenditure indicator and fiscal stance

With the reform of the Stability and Growth Pact (SGP) (3), Member States’ fiscal commitments are
expressed in terms of country-specific net expenditure paths. The new focus on such net expenditure
paths is operationalised through a new net expenditure growth indicator. The net expenditure growth
is the single operational indicator used to assess Member States’ compliance with Council fiscal
recommendations. Moreover, for the purpose of assessing the impulse provided by fiscal policy to the
economy, the Commission services monitor the growth of a similar (somewhat broader) net
expenditure-based metric relative to medium-term potential GDP growth.
The inclusion of the Recovery and Resilience Facility in the forecast

Transactions related to the RRF in the forecast are recorded in line with Eurostat’s ‘Guidance note on
the statistical recording of the Recovery and Resilience Facility’ of 7 October 2021
(https://ec.europa.eu/eurostat/documents/1015035/12618762/GFS-guidance-note-statistical-
recording-recovery-resilience-facility.pdf). In particular, this implies that, except for 2020, the
budgetary impact of any expenditure or other costs financed with non-repayable financial support
(‘grants’) from the RRF is neutralised in revenue projections by matching transfers received from the
EU. Expenditure financed by loans from the RRF are not neutralised and thus affect the government
balance, while the loans by the RRF are recorded as Member States’ debt towards the EU.
Budgetary data and forecasts

The forecast incorporates validated public finance data up to 2024 as published in Eurostat’s news
release of 22 April 2025 (4). In this press release, Eurostat withdraws its reservation on the quality of
data reported by Estonia for 2023. The Estonian statistical recorded the relevant expenditures in 2023.
The public finance forecast is made under the ‘no-policy-change’ assumption, which extrapolates past
revenue and expenditure trends and relationships in line with past policy orientations. This may also
include the adoption of working assumptions, in particular to deal with structural breaks. The no-policy-
change forecast includes all fiscal policy measures that imply a change to past policy orientations on
the condition that they are sufficiently detailed as well as adopted or at least credibly announced by
the cut-off date.
In line with Eurostat’s press release, EU and euro area aggregates for general government balance and
debt are based exclusively on the Member States’ balances and debt. For debt, whereas Eurostat
publishes the consolidated figures (corrected for intergovernmental loans, including those made
through the European Financial Stability Facility), the projections in the forecast years 2025 and 2026
are published on a non-consolidated basis. To ensure consistency in the time series, historical data are
also published on the same basis. For 2024, this implies an aggregate debt-to-GDP ratio that is
somewhat higher than the consolidated general government debt ratio published by Eurostat in its
news release 22 April 2025 (by 1.5 pps. in the euro area and by 1.2 pps. in the EU).

(3)
Regulation - 2024/1263 - EN - EUR-Lex ; Regulation - EU - 2024/1264 - EN - EUR-Lex
(4)
Euro area government deficit at 3.1% and EU at 3.2% of GDP

(Continued on the next page)

12
 Economic outlook for EA and EU

Box (continued)

2. Ad hoc technical assumptions underlying the forecast

US tariffs

The following table details the technical assumptions on tariffs.

Table 2: Tariff assumptions

Tariff Announced Effective Status Ad hoc assumption
Sector tariffs
25% tariff on stee and aluminum products February 10, 2025 March 12, 2025 In effect In effect over forecast horizon
25% tariff on automobiles March 26, 2025 April 3, 2025 In effect In effect over forecast horizon
25% tariff on all auto parts in effect over forecast
25% on auto parts March 26, 2025 May 3, 2025 In effect
horizon (1)
Canada February 1, 2025 March 4, 2025
- 25% tariff on non USMCA-compliant goods February 1, 2025 March 4, 2025 In effect In effect over forecast horizon
- 25% tariffs on USMCA-compliant goods February 1, 2025 March 4, 2025 Delayed Not reinstated over forecast horizon
-10% tariff on oil and gas February 1, 2025 March 4, 2025 Delayed Not reinstated over forecast horizon
Mexico February 1, 2025 March 4, 2025
- 25% tariff on non USMCA-compliant goods February 1, 2025 March 4, 2025 In effect In effect over forecast horizon
- 25% tariffs on USMCA-compliant goods February 1, 2025 March 4, 2025 Delayed Not reinstated over forecast horizon
Most other countries (2)
10% universal duty on all imported goods with follwoing exemptions:
Copper, Pharmaceuticals, Semiconductors, Electronics, April 2, 2025 April 5, 2025 In effect In effect over forecast horizon
Lumber articles, Critical minerals, Energy and energy products
Delayed for 90 days for all
Additional tariffs of 10%-80% on countries/regions having a bilateral trade surplus April 2, 2025 April 9, 2025 Not reinstated over forecast horizon
countries, bar China
China

It is assumed that the 54% rate announced before the April 9

escalation is in place over the forecast horizon and same rate
February 4, 2025; Increased applies to US exports to China. This, together with non-tariff
145% tariff on all Chinese goods February 1, 2025 In effect
March 4, 2025; Increased April 9 barriers, is assumed to lead to a reduction in bilateral trade in
goods in volume terms, relative to 2024 levels, of 20% in 2025
and a further 20% in 2026.

Notes: (1) Temporary tariff relief in the form of an “import adjustment offset” for parts used in vehicles assembled in the United
States is neglected. (2) Imports from Belarus, Cuba, North Korea, and Russia (known as Column Two countries) are subject to their
separate duty rates only.

Russian invasion of Ukraine and geopolitical tensions

The economic impact of Russia’s war against Ukraine remains highly uncertain and depends crucially
on its evolution. The central scenario assumes that geopolitical tensions in the region and sanctions
against Russia remain in place throughout the forecast horizon.
People fleeing the war in Ukraine to the EU

The number of beneficiaries of temporary protection in the EU was about 4.3 million by January
2025. (5) It is assumed that the number of active temporary protection registrations will stay broadly
stable over 2025 before decreasing to 4.1 million by the end of 2025 and to 3.8 million by the end of
2026. (6) Over 2025, new registrations are expected to continue declining at the average rate observed
in the last two years, while downward revisions by Member States (i.e. data revisions by Member States
reflecting people who returned to Ukraine, moved on to another country, or attained another status in
their country of residence) are expected to continue at a rate reflecting the average over the same
period. This results in the projection of an annual average of people seeking protection of about 4.2
million in 2025 and 4.0 million in 2026. Assumptions on the geographical distribution of people fleeing
the war reflect their current distribution across Member States. Finally, as the labour market integration
of people fleeing the war continues to make progress, related assumptions remain in line with the
Autumn 2024 Forecast.

(5)
Eurostat [data code: migr_asytpsm].
(6)
These technical assumptions are not meant as predictions of the development of the conflict, nor of policy
decisions made by the EU or Member States related to the temporary protection scheme.

13
 2. INTERNATIONAL ENVIRONMENT

A more restrictive trade environment and higher uncertainty are set to slow global
economic activity and in particular trade. In the Autumn Forecast, global growth was
projected to reach 3.3% in both 2025 and 2026, the same pace of growth seen in 2024, though
still below the average pace recorded before the pandemic. Global trade was expected to pick up
momentum in 2025 and 2026 and to grow broadly in line with GDP. The current forecast revises
the global outlook for growth and trade significantly downward. Aside from the direct impact of
tariffs, weighing particularly on merchandise trade flows, the sharp rise in trade policy uncertainty
is set to affect both investment and consumption. Concerns over longer term geo-economic
fragmentation may also affect investment plans and the efficiency of supply chains, adversely
affecting productivity. Following the pandemic and energy price shocks, which reduced fiscal
buffers and prompted a strong monetary policy response, the policy space to address renewed
vulnerabilities appears limited for many advanced and emerging economies.
The global economy registered a steady albeit moderate expansion in late 2024, but
early year survey data for 2025 point to some fall in momentum. Global economic activity
is estimated to have expanded by around 0.8% q-o-q in 2024-Q4 (see Graph I.2.1). This was only
marginally slower than the 0.9% expansion seen in 2024-Q3. The global economy is estimated to
have grown by 3.3% in 2024, the same pace as in 2023. Advanced economies are estimated to
have grown by 1.9% and emerging and developing economies by 4.3%. China grew by 5%, and the
US by a strong 2.8%, with both ending the year on a solid footing. Recent survey data (PMIs) for
March 2025 continue to show expansion but they have deteriorated in April (see Graph I.2.2). The
Global composite PMI fell from 52 in March to 50.8 in April. The services PMI fell from 52.6 in
March to 50.8 in April, while the manufacturing PMI weakened slightly from 50.3 in March to 49.8
in April. Both manufacturing and service PMIs are a little stronger for the emerging economies than
for the advanced economies.
Graph I.2.1: Global GDP growth Graph I.2.2: World PMIs

1.8 q-o-q %
change 62 Index >50 =
1.6 expansion
60
1.4
1.2 58
1.0
56
0.8
0.6 54

0.4 52
0.2
50
0.0
-0.2 48
21Q4 22Q2 22Q4 23Q2 23Q4 24Q2 24Q4 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25
GDP contribution emerging markets Composite PMI Manufacturing PMI Services PMI
.
GDP contribution advanced economies
Source: S&P Global.
Sources: OECD, IMF and national sources.

Global inflation eased through 2024, though the beginning of 2025 saw renewed
inflationary pressures across both advanced and emerging economies. Headline inflation
in the majority of G20 economies eased through 2024, helped by the continued decline in goods
price inflation and – especially in the second part of the year - some moderation in energy prices.
However, inflation ticked up again in early 2025 with inflation in emerging markets rising from
3.1% in December 2024 to 3.5% in March 2025 and for advanced economies from 2.2% in
December to 2.6% in March. Services and shelter (rent) inflation remains elevated in some
economies (e.g. UK, Canada, US). In emerging economies, inflation shows significant regional
divergence, with inflation rates in the Asian region typically very low or even in negative territory

14
 Economic outlook for EA and EU

(China, Indonesia) or continuing to fall (India), while in Latin America the disinflation process has
slowed and inflation remains elevated in some economies (e.g. Mexico, Brazil).
Global financial conditions have tightened amid market volatility, shifting sentiment,
and elevated uncertainty. Global financial conditions tightened abruptly in early April as
markets reacted badly to US tariff announcements, with sharp selloffs. Although markets have
since rebounded, financial conditions are tighter than in the autumn. Despite the volatility in bond
yields in recent weeks, ten-year yields in the US are now close to levels at the time of the Autumn
Forecast, while in the EU, UK and Japan they are a little higher. However, sentiment towards risks
assets has soured somewhat, and spreads and risks premiums have widened – particularly for
corporates, including in the US. By the cut-off date of the forecast, equity markets had regained
most of the losses incurred since 2 April, but volatility remains high, and the elevated uncertainty
is likely to weigh on credit developments until the outlook becomes clearer. The sharp appreciation
of the US dollar in November through to January, and equally steep depreciation since mid-
January, has added another element to the mix of factors affecting global financial conditions.
Real GDP contracted in 2025-Q1 in the US, and forward-looking indicators suggest a
worsening of the outlook. The US economy expanded at a healthy pace of 2.8% in 2024 with
employment gains and rising real wages supporting robust household consumption. The US
unemployment rate was 4.2% in March, roughly unchanged since mid-2024. Although domestic
demand continued to expand in the first quarter, by 0.6% q-o-q, an apparent shift towards imports
in anticipation of tariffs led to a surprise 0.1% q-o-q GDP contraction. Sentiment has also shifted
profoundly. The University of Michigan consumer sentiment index plunged to 52.2 in April 2025
from 71.1 in January on expectation of higher inflation and weaker economic activity and similar
negative trends are visible in US companies’ investment intentions. The March NFIB survey of small
businesses shows that business uncertainty is at record high levels. Headline PMIs have materially
worsened since December, mainly on the loss of impetus in the services sector, with the S&P
services PMI falling to 51.4 in April, from 56.8 in December. The manufacturing PMIs moved into
expansionary territory in April 50.7, up from 49.4 in December, but this partly reflects some
business stockpiling in anticipation of tariffs.
The US economy is expected to slow down in 2025 and 2026. The unprecedented increase in
the effective tariff rate on US imports, and very elevated policy uncertainty is projected to affect
households’ consumption and firms’ investment decisions, with consumers pulling back on
spending and businesses delaying corporate investment. Employment growth is set to slow down
and the unemployment rate to increase moderately. With wage growth stalling just as tariffs spill
over to consumer prices, household incomes are likely to receive a hit. The ongoing worsening of
financial conditions is expected to further bear on personal consumption and fixed investment,
while higher mortgage rates may weigh on residential investment. The higher tariffs and weaker
dollar are set to significantly reduce import growth, while less dynamic global demand and more
expensive production inputs are projected to weigh on exports over the forecast horizon. The
current account balance is forecast to improve modestly but the deficit, at 3.4% of GDP in 2026, is
expected to remain large. Overall, the US economy is forecast to grow by 1.6% in both 2025 and
2026, down by 0.5 pps. in 2025 and 0.6 pps. in 2026 relative to the AF24. The forecast (i)
assumes that the Tax Cuts and Jobs Act of 2017 will expire at the end of 2025, in line with its
legal provisions, (ii) does not account for the various government saving proposals under
discussion, which for now are highly uncertain, and (iii) makes assumptions about the extra
customs revenue from the new tariffs. Together, these assumptions lead to projection of a gradual
reduction in the US headline fiscal deficit, from 7.5% of GDP in 2024 to 5.8% of GDP in 2026.
Currently there is a particularly high risk that the TCJA will be extended for another 10 years or
longer, and that the extra revenue from tariffs will be lower than pencilled in, due to some import
tariff rates being lower than was assumed in the baseline for this forecast. Should either of these
risks materialize, the US headline deficits in 2025-2026 may be substantially higher than
projected.
Tariffs are set to push up inflation in the US over the forecast horizon. CPI inflation in the
US already proved sticky in late 2024, rising from 2.4% in September to 3% in January 2025,

15
 European Economic Forecast, Spring 2025

though it eased to 2.4% in March, partly on account of lower energy prices. Inflation excluding
energy and food – which had been stuck at around 3.3% since last September, driven largely by
housing and services - also eased in March to 2.8%. Nevertheless, inflation is expected to rise later
this year as the higher import tariffs are passed through to consumer prices. CPI inflation is
expected to reach 3% in 2025 (up by 1 pp compared to the AF24), moderating to 2.3% in 2026 (up
by 0.3 pps. compared to the AF24). Assuming medium term inflation expectations remain
anchored, this may be a one-off shift in the price level. With economic growth expected to fall
below potential, this slower return of CPI inflation towards the Fed’s 2% inflation target may
create some tension between the Fed’s dual goals of maximising employment and achieving price
stability.
Graph I.2.3: Exchange rates vs USD Graph I.2.4: 10-year government bond yields of major
World economies
106 USD per LCU, Index
1Jan24=100
104 5.0 %
4.5
102
4.0
100 3.5
3.0
98
2.5
96 2.0
1.5
94
Depreciation 1.0
92 0.5
Jan-24 Apr-24 Jul-24 Oct-24 Jan-25 Apr-25 Oct-24 Dec-24 Feb-25 Apr-25

Euro area United Kingdom China US Eurozone AAA-rated

. UK Japan
China
Notes: Negative numbers mean depreciation.
Sources: IMF and ECB. Sources: US Department of the Treasury, ECB, Bank of England
and Thomson Reuters.

The outlook for other advanced economies Graph I.2.5: US imports by country of origin in 2024
has also softened, particularly for those in
% of total
the firing line of tariffs. The introduction of
the tariffs on Canada assumed in the baseline is
expected to have a serious impact on the
EU, 18.5
Canadian economy, given Canada’s high trade
exposure to the US, leading to several quarters of Others, 24.4

somewhat slower growth. The outlook has been UK, 2.1

downgraded significantly, by 0.8 pps. in both Mexico, 15.5

2025 and 2026. Projections for the UK have also South Korea, 4.0

been marked down. After a solid first half of

Japan, 4.5 China, 13.4
2024, momentum in the UK tailed off entirely Canada,
towards the end of the year, implying both a 12.6
Other America, 4.9
lower carry-over and a more delayed rebound
than was anticipated in the AF24, with additional
drag also exerted by the shifts in global trade Source: US census Bureau.
policy. Projections for Japan were lowered due to fragile domestic demand and the worse external
environment. A larger revision was made for South Korea, reflecting both weaker export prospects
and the political turmoil at the end of 2024 which is expected to have weighed on household
spending in the first quarter of 2025.
China's growth surprised on the upside in late 2024 and early 2025, with net exports
providing a boost. Growth accelerated in 2024-Q4, bringing annual growth to 5%. The October-
November policy package, the most ambitious since the pandemic, appears to have given the
economy a late-year boost, aided by rapid growth in exports in the second half of 2024. Growth
remained strong in 2025-Q1 at 5.4% y-o-y, driven by household spending and net exports.

16
 Economic outlook for EA and EU

Manufacturing exports picked up strongly as US buyers advanced purchases expecting higher

tariffs. The property sector continues to deliver mixed signals: after some improvement in late
2024, prices and sales of residential floor space fell in the first two months of 2025, with
inventories remaining high, particularly in lower-tier cities. Government interventions, such as
developer financing programs and local government purchases of unsold units, have been slow to
materialise and largely ineffective in boosting demand.
China’s domestic demand is still held back by structural factors, and trade prospects
have become more uncertain, weakening the growth outlook. Growth in household
consumption remains burdened by decelerating income growth, disappointing labour market
outcomes and negative wealth effects stemming from the property crisis. The tariffs recently
imposed by the US have significantly hardened China’s access to the US market, and the baseline
scenario assumes a 40% reduction in US-China bilateral trade in goods over 2025-26. The US
share in China’s exports had declined to about 15% in 2024, or 3% of GDP. While the drag on
China’s economy is therefore still considerable, the impact can potentially be offset to some extent
by looser domestic policy. The latest Government Work Report reaffirmed a 5% growth target for
2025, maintaining an ambitious policy stance. To support this target, however, fiscal policy would
need to play a much greater role. Overall, growth in China has been revised downwards compared
to the autumn and is now expected to ease to 4.1% in 2025 and a little further in 2026.
Prospects for other EMEs are also weaker than in autumn, though the outlook varies
widely both across and within regions. India’s economy started to slow in the second half of
2024 on account of weak exports and household consumption growth. Together with higher
external uncertainty, this has led to a downward growth revision relative to the autumn. India's
economy is nevertheless expected to remain one of the fastest-growing major economies in 2025.
Growth in ASEAN is expected to remain relatively robust in both 2025 and 2026, particularly in
Indonesia, the Philippines, and Vietnam. In most economies, domestic demand will remain a key
driver of growth. Export performance and growth are expected to moderate compared to the AF24,
in line with heightened uncertainties stemming from the deteriorating external environment and
the expected slowdown in growth and trade in China. The US tariffs on Mexico (25% on all goods)
were postponed for one month until the beginning of April, though they are assumed to be in place
over the forecast horizon. This has already increased business uncertainty and worsened
investment sentiment in Mexico and is likely to push the economy into a recession. In Argentina,
the economic stabilisation program of President Milei has started to bear fruit, with the economy
rebounding strongly in the second half of 2024. Consequently, the outlook for Argentina has been
upgraded significantly. After performing above expectations for three consecutive years, the
Brazilian economy slowed in the second half of 2024, while interest rates were hiked again as
inflation remained persistent. The economy therefore faces a weaker outlook than projected in the
AF24 for both 2025 and 2026. The downward pressures on oil prices will likely reduce growth in
Saudi Arabia and the region, but with some offsetting benefits for oil importers.
Global goods trade recovered in 2024 and was boosted by frontloading of imports to
the US ahead of the looming tariffs. Global merchandise trade recovered steadily in 2024,
with volumes growing 2.4%, compared to the 1% decline in 2023. Emerging economies were the
main drivers of global goods trade, with trade growth of 4.8% in 2024, compared to just 1%
growth for advanced economies. Excluding the EU, global merchandise trade growth was more
dynamic expanding by 3.4% in 2024. Merchandise trade towards the end of 2024 and in early
2025 appears to have benefited from frontloading of imports to the US ahead of the looming
tariffs. This is also set to boost global trade flows in 2025-Q1, with some offsetting decline later in
the year. Merchandise goods volumes in January and February of 2025 were some 3.6% higher
than in the same two months of 2024, according to CPB data.
The tariff escalation, and unprecedented levels of trade policy uncertainty, will weigh
on global trade growth ahead. Tariffs are expected to accelerate trade diversion away from the
US and likely reduce long term trade efficiency and foster trade fragmentation. Overall, global
goods trade is projected to weaken substantially compared to 2024 but to still grow positively over
the forecast horizon, supported by further monetary easing in advanced economies. Services trade

17
 European Economic Forecast, Spring 2025

growth is forecast to remain relatively resilient over the forecast horizon as it is not directly
subject to tariffs. However, the growth rate of services is projected to slow as the tariff-induced
weakening of global goods trade is also set to negatively affect transport-related services.
Graph I.2.6: Growth in global goods trade Graph I.2.7: Container shipping costs and supply-chain
pressure index
25
3m ma, y-o-y
% change 18 1000 USD/container Index (std dev 6
from avg

Thousands
20 16 5
index)
14 4
15 12
3
10
10 2
8
1
6
5
4 0

2 -1
0
0 -2
Jan-21 Jan-22 Jan-23 Jan-24 Jan-25
-5
Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Drewry Global Container Freight Index
World Advanced economies Emerging markets Drewry China-EU Container Freight Index
Global Supply Chain Pressure Index (rhs)
Source: Own calculations based on CPB data.
Sources: Drewry and New York Fed.

Supply chain pressures eased in early 2025, with shipping rates declining substantially.
After gradually increasing since October 2024, the Federal Reserve Supply Chain Pressure index (1)
declined in April 2025 to levels below its long-term average (-0.29). Supplier delivery times have
remained stable so far in 2025. With the maritime shipping industry having adjusted to the de
facto closure to traffic of the Red Sea, transit rates in the Suez Canal remain around the lowest
point since the start of the pandemic. By contrast, traffic along the Panama Canal has been
restored, with daily transit rates returning to pre-drought levels. The combination of the end of US
import frontloading, the sharp tariff-driven decline of shipping demand for U.S-China routes and
heightened trade policy uncertainty has led container rates to halve since the beginning of the
year.
Overall, projections for both global growth and trade are weaker than at the time of the
Autumn Forecast. For 2024, the higher outturns for China and strong performance in the US
imply a slight mark-up in global growth (excluding the EU) relative to autumn, to 3.6%. Thereafter,
the growth momentum is expected to weaken materially. For 2025 global growth (excluding the
EU) is now projected at 3.1% for 2025 and 3.2% for 2026, compared to 3.6% for both years in the
autumn. This reflects the above-mentioned downgrades to some large advanced and emerging
market economies, including the US, China, Canada, UK, Japan, India, and Mexico. Including the EU,
global GDP growth is projected to be 2.9% in 2025 and 3% in 2026 – an adjustment of -0.4 pps.
and -0.3 pps. respectively, relative to the AF24.
Projections for global trade (ex-EU) are substantially weaker than in the autumn, mainly
reflecting the impact of tariffs included in the baseline. Although trade growth remained
robust in 2025-Q1 due to frontloaded purchases ahead of tariffs, this is set to level off, and a
more restrictive trade environment is expected to dampen global trade growth. Overall, global
trade is now projected to expand well below the pace of global economic growth over the forecast
horizon.

(1)
The index integrates a number of commonly used metrics with the aim of providing a comprehensive summary of
potential supply chain disruptions.

18
 Economic outlook for EA and EU

Table I.2.1: International environment

(Annual percentage change) Spring 2025 Autumn 2024

Forecast Forecast
(a) 2021 2022 2023 2024 2025 2026 2024 2025 2026
Real GDP growth

Japan 3.3 2.7 0.9 1.5 0.1 0.7 0.6 0.2 1.2 1.0
United Kingdom 2.2 8.6 4.8 0.4 1.1 1.0 1.3 1.0 1.4 1.4
United States 14.9 6.1 2.5 2.9 2.8 1.6 1.6 2.7 2.1 2.2
Emerging and developing Asia 35.6 7.5 4.6 5.8 5.2 4.7 4.7 5.3 5.1 5.0
- China 19.5 8.6 3.1 5.4 5.0 4.1 4.0 4.9 4.6 4.4
- India 8.3 9.7 7.6 9.2 6.5 6.4 6.4 7.2 6.9 6.7
Latin America 7.3 7.4 4.0 2.3 2.1 1.8 1.8 1.8 2.4 2.6
- Brazil 2.4 4.8 3.0 3.2 3.4 2.0 1.5 3.1 2.3 2.4
MENA 5.5 4.6 5.9 2.1 2.2 3.2 3.7 2.3 3.7 3.5
Eastern Neighbourhood and Central Asia 1.1 4.6 3.4 4.6 4.9 4.3 3.8 4.1 4.1 3.5
Russia 3.5 5.9 -1.4 4.1 4.3 1.7 1.2 3.5 1.8 1.6
Sub-Saharan Africa 3.3 4.3 3.6 2.5 2.9 3.7 4.1 2.9 4.1 4.5
Candidate Countries 2.4 9.6 -1.4 5.0 3.3 2.7 3.7 3.2 3.2 4.3
World excluding EU 85.6 6.6 3.5 3.9 3.6 3.1 3.2 3.5 3.6 3.6
World 100.0 6.5 3.5 3.4 3.3 2.9 3.0 3.2 3.3 3.3
Trade of goods and services, volumes
World excluding EU 11.3 4.8 1.9 3.7 2.0 2.2 3.4 3.4 3.4
World 11.1 5.7 1.1 2.9 1.8 2.2 2.6 3.1 3.3
Trade of goods, volumes
World excluding EU 11.9 2.2 -0.2 3.4 1.6 2.0 3.1 3.5 3.4
World 11.7 3.1 -0.9 2.3 1.3 2.0 2.1 3.2 3.3
Trade of services, volumes
World excluding EU 10.0 16.4 10.2 4.8 3.2 3.0 4.2 3.2 3.3
World 9.4 15.8 7.8 4.4 2.9 2.8 4.0 2.9 3.1
(a) Relative weights in %, based on GDP (at constant prices and PPS) in 2024.(b) Imports of goods and services to the various markets (incl. EU-markets) weighted according to
their share in country's exports of goods and services.

Oil prices have dropped sharply since the Autumn Forecast amidst fear of weakening
global demand and oversupply concerns. After the tariff announcement by the US, Brent
prices dropped 16% in less than a week to 64 USD/bbl on 8 April. The subsequent suspension of
part of the tariff regime and US-Chinese attempts at rapprochement have helped to stabilise
prices, although they remain at a lower level than before 2 April. On the supply side, the OPEC+
announcements in April and May to increase supply more than originally scheduled depressed
futures prices further. Moreover, non-OPEC+ members are also projected to increase production. At
the same time heightened sanctions pressure against Iran and Venezuela from the US is exerting
some upward pressure on prices.
Markets expect crude prices to continue falling until 2025-Q4 and stabilise thereafter.
For 2025-Q2 Brent futures point to a price around 67 USD/bbl, around 9% lower compared to
those assumed in the Autumn Forecast. Quarterly averages of Brent futures continue to drop for
the following two quarters, then stabilise at around 64 USD/bbl in 2025-Q4 and remain broadly at
that level over the rest of the forecast horizon. The oil price in euro terms is expected to be even
lower, especially in 2026. Overall, quarterly averages of Brent futures over the forecast horizon are
on average nearly 10.5% lower in USD terms than at the time of the Autumn Forecast. Risks are
high for oil prices in both directions. Substantial uncertainty emanates from the US administration
and its erratic trade policies. Potential trade deals might buoy markets expectations about future
oil demand, while escalating trade tensions would pull prices even lower. On the supply side,
increases by OPEC+ countries and an end to the war in Ukraine would decrease prices. At the same
time an additional expansion of the US sanction regimes against Iran and Venezuela would
constrict global supply. Similar supply side risks are still associated with a renewed escalation in
the Middle East.
European TTF gas prices almost halved in recent months and are expected to remain
lower than anticipated in autumn over the forecast horizon. The halt of Russian piped gas
transit via Ukraine on January 1 and lower than average winter temperatures led to European gas
storage inventory dropping faster below the seasonal average, leading to higher prices, which
peaked at 59 EUR/MWh in mid-February. Since then, gas prices have fallen steeply to 32 EUR/MWh

19
 European Economic Forecast, Spring 2025

by the end of April, the cut-off date of this forecast. The decline was led by both weaker demand
expectations and a steady supply outlook. Moreover, warmer than usual weather in March and April
and increased renewable energy generation added to downward pressure on prices. Looking
forward, the expansion of new LNG export capacity led by the US and Qatar may lead to less
market pressures. (2) Compared to the autumn, the futures contracts curve shifted lower, by around
-4% in 2025 and -6% in 2026, on average. After increasing by 10% in 2025 over 2024, futures
suggest that gas prices in the EU are expected to drop by 14% in 2026, averaging 36 EUR/MWh.
Reflecting these lower gas prices, average European wholesale electricity futures also decreased
by around 4% over the forecast horizon, compared to the autumn. Electricity prices are expected to
be 9% higher in 2025 compared to 2024, but to decline by 5% in 2026.
Graph I.2.8: Brent oil prices Graph I.2.9: TTF gas futures prices

70
100 $/bbl €/MWh

95
60
90

85 50
80

75 40

70
30
65

60 20
Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 Jul-26 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 Jul-26
Futures (10-day mov avg) At the time of SF24 Futures (10-day mov avg) At the time of SF24
At the time of AF24 historical prices At the time of AF24 historical prices

Source: S&P Global. Source: S&P Global.

European agricultural produce prices rose in Graph I.2.10: Electricity futures prices
2025-Q1 but are expected to fall over the 160 €/MWh
forecast horizon. Compared to the Autumn
140
Forecast both agricultural produce prices and
their expected future trajectories have shifted 120
upwards but remain downward sloped over the
forecast horizon. Most prominent drivers of the 100
recent increases were beef, cheese, cocoa and 80
coffee. Prices for beef were supported by reduced
international and domestic supply. Supply side 60

constraints, particularly a scarcity of raw milk and 40

associated high milk prices, were driving cheese Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-26 Jul-26

price increases. Cocoa and coffee prices were Futures (10-day mov avg) At the time of SF24
pushed up by a combination of production At the time of AF24 historical prices
problems in key suppliers and robust global
Source: S&P Global.
demand. The projected fall in prices over the
forecast horizon is shared by both animal and vegetable products, with vegetable products
showing a more pronounced decline, driven by palm oil, rapeseed oil, cocoa, coffee and sugar.
Precious metal prices continue to rise, while industrial metal prices have started to drop, although
futures curves for both remain upward tilted. Precious metal prices have been steadily increasing
since the beginning of the year and continued rising after the 2 April US tariff announcement, as
the uncertainty drove investors into safer assets. Precious metal futures indicate further price
increases over the forecast horizon. In contrast, industrial metals like copper, aluminium and steel,
have declined in the wake of the escalating US tariffs, with futures curves also shifting downwards
but remaining tilted upwards over the forecast horizon.

(2)
International Energy Agency (Gas Market Report, Q1-2025)

20
3. FINANCIAL CONDITIONS IN THE EU

Since the Autumn 2024 Forecast, the ECB has cut rates four times - each time by 25bps.
The ECB has continued to lower its policy rates as the disinflation process has remained on track,
with both headline and underlying inflation declining towards the ECB’s inflation target. Since the
start of the easing cycle in June 2024, the main policy rate – the deposit facility rate - has been
lowered by 175 bps, to 2.25%. The rate on main refinancing operations was lowered to 2.40% and
the marginal lending facility rate to 2.65%.
Markets have marginally reassessed the ECB future policy rate path. The ECB Governing
Council reaffirmed in the April meeting that it would continue to follow a data-dependent and
meeting-by-meeting approach to determining the appropriate monetary policy stance to ensure
that inflation stabilises sustainably at its 2% medium-term target. Reflecting a sharp decline in
short-term inflation expectations in the context of increasing downside risks to the growth outlook,
at the cut-off date of the forecast markets expected the policy rate to go down to 1.65% in the
second half of this year (through two to three additional 25 bps cuts) before increasing very mildly
to 1.8% by end 2026. This implies about 20-30 bps lower short-term rates than assumed at the
time of the Autumn Forecast (see Graph I.3.1). As a result, over the forecast horizon, the Euribor 3-
months rates are expected to move on a somewhat lower trajectory than assumed in the AF24.
Graph I.3.1: Short-term euro interest rate expectations Graph I.3.2: Yield curves in the euro area and the US

6 %
4.0 %
5
3.0
4

2.0
3

1.0
2

0.0
1
remaining maturity in years
-1.0 0
Jan-22 Oct-22 Jul-23 Apr-24 Jan-25 Oct-25 Jul-26 0 5 10 15 20

ECB deposit rate (historical) SF25 assumption EA* - - SF25-cut-off US - SF25-cut-off

EA* - AF24 US - AF24
AF24 assumption
EA* - SF24 US - SF24

Notes: Expectations based on future contracts for 3 months Notes: * Euro area AAA-rated government securities.
Euribor. Sources: ECB, US Department of Treasury.
Sources: S&P Global, LSEG, Bloomberg, ECB.

Outside the euro area, EU central banks followed different paths, depending on their
respective position in the monetary loosening cycle. The monetary authorities in Denmark,
Sweden and Czechia continued decreasing rates broadly in parallel with the monetary policy
conducted by the ECB. By contrast, central banks in Poland, Hungary, and Romania paused their
rate cuts last autumn, as their economies still experience high inflation rates. By the end of 2026
though, Poland and Hungary are expected to have cut rates more forcefully than the ECB.

21
 European Economic Forecast, Spring 2025

Following a bout of volatility, long-term real Graph I.3.3: Euro area benchmark interest rate
interest rates in the euro area are now
above their levels in the autumn. The high 6 %

forecast
volatility reflected investors’ shifting views on US 4
and EU growth prospects. Markets initially 2
welcomed the outcome of the US elections, and 0
expectations of a pro-business policy agenda
-2
pushed up long-term yields in both the US and
the euro area. However, sentiment shifted by -4

mid-January, with both Treasury and Bund yields -6

falling amid weakening growth prospects. In early -8

March, the announcement of a sizeable fiscal -10
stimulus in Germany, with a focus on investment, Jan-15 Jan-17 Jan-19 Jan-21 Jan-23 Jan-25

drove the 10-year German government bond yield Short-term Long-term

up by around 40 basis points, with other euro Short-term (real) Long-term (real)

area sovereign bond yields following suit. A term- Notes: Short term rate: 3M Euribor; Long term rate: 10Y interest
structure model-based decomposition of EU rate swap; Real rates are derived from the respective short or
long-term rate minus annual HICP inflation and average future
yields suggests that the increase was not related inflation inferred from 10Y inflation swaps, respectively. Short-
to changes in long-term credit risk, but rather to a term nominal forecasts (derived from forward short-term rates)
are deflated by ECFIN inflation forecasts. Long-term nominal
rising term premium. (3) This reflected a forecasts (derived from forward long-term swap rates) are
combination of uncertainty about future short- deflated by their respective forward inflation swaps (i.e. 1Y 10Y
term rates and economic growth prospects, and 2Y 10Y forward inflation swap rates).
Sources: Bloomberg, ECB.
expected demand-supply imbalances in bond
markets driven by a surge in German debt issuance. Since mid-March, long-term interest rates
have declined, as markets realised that the implementation of the stimulus package was likely to
be gradual. Downward pressures were exacerbated by a flight to safety triggered by risks
stemming from US trade policy. At the cut-off date of this forecast, market expectations for real
10-year yields were however markedly higher than assumed in autumn—by about 40 basis
points—suggesting that some of the factors behind the March sudden rise in term premium
persisted and point to a tightening of financial conditions relative to the autumn. In nominal terms,
the Bund 10 years yield was close to the levels recorded at the time of the Autumn Forecast, due
to declining inflation expectations. Still, the yield curve had steepened (see Graph I.3.2.), with yields
for bonds with maturities above 10 years slightly above —by around 20 to 30 basis points – their
level in autumn.

(3)
Analysis based on the PRISM model applied to daily data for Germany, France and Italy. For model details, see
Monteiro, D. P. (2025), “A PRISM decomposition of euro area interest rates”, Quarterly Report on the Euro Area, 2025
vol. 1 (forthcoming).

22
 Economic outlook for EA and EU

Graph I.3.4: Sovereign bond yields, US and Germany Graph I.3.5: Market-based inflation expectations

4.8 pps. pps. 3.0

%
3.0
4.7 2.9
2.8
4.6
2.7
2.5
4.5 2.6
4.4 2.5

4.3 2.4 2.0

2.3
4.2
2.2
4.1 2.1 1.5
Jan-23 Jul-23 Jan-24 Jul-24 Jan-25
4.0 2.0
Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 5 years forward 5 years ahead
3 years forward 3 years ahead
United States Germany (rhs)
1 year forward 1 year ahead S

Source: S&P Global. Notes: Based on forward inflation swap rates

Source: Bloomberg.

Amid increased volatility, market-based inflation expectations have come down to

multi-year-lows. Market-based inflation expectations for the euro area on all horizons have been
volatile in recent months, driven by inflation releases and various policy announcements. While
markets initially viewed Germany’s infrastructure and defence spending plan and the Commission’s
Readiness 2030 package (4 March) as lifting inflation, they eventually reassessed inflationary
pressure on the expectation of a much more gradual fiscal impetus. The announcement of US
tariffs on 2 April resulted in a further decline in inflation expectations to multi-year lows. These
expectations rebounded partly following the partial suspension of tariffs over the course of April.
The term structure of financial markets inflation expectations points to a decline in inflation from
its current levels above 2% to around 1.7% between mid-2026 and mid-2027 and then to a
progressive return towards the inflation target. The 5y5y inflation-linked swap (ILS) rate (4) stood at
2.1% in late April.
Compared to its level at the time of the AF24, at the cut-off date of the forecast the
EUR was about 5% stronger against the US dollar and over 3% higher in nominal
effective terms. The underperformance of US equities and the rise in US treasury yields was
accompanied by a weakening of the US dollar – all symptoms of the pull out of capital from the
US. As a result, the euro dollar exchange rate is now at levels last seen early 2022. The
appreciation of the euro was however broad-based, with significant gains also against the Chinese
Renminbi, the British pound, the Korean won, the Australian dollar, as well as a range of emerging
market currencies. The euro weakened moderately relative to the Japanese yen and some
currencies of non-euro area EU Member States. As from March, the euro was also supported by
positive investor sentiment following the announcements of the incoming German government’s
fiscal plans.

(4)
The 5y5y inflation expectation stands for five-year inflation in five years’ time and is calculated from inflation linked
swaps. Note that market-based inflation expectations capture both 'true' inflation expectations, as well various risk
premia

23
 European Economic Forecast, Spring 2025

Graph I.3.6: Equity markets Graph I.3.7: Corporate spreads over German 5-y sovereign
170 bonds
Index,
160 1 January 2023 =100 350 200000

150 180000
300
140 160000

130 250 140000

120 120000
200
110 100000
150
100 80000

90 100 60000

80 40000
Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 50
20000
Shanghai Stock Exchange EuroSTOXX
0 0
NIKKEI 225 MSCI UK Jan-23 Jul-23 Jan-24 Jul-24 Jan-25
S&P 500
AA A BBB CCC & lower (rhs)

Source: S&P Global.

Source: S&P Global.
European equity and corporate bond Graph I.3.8: Financial stress indicators
markets strongly reacted to the successive 50 0.8

US tariff announcements. Risk aversion among 45

0.7
EU investors soared in the aftermath of the 40
0.6
reciprocal tariff announcement of 2 April, as they 35
0.5
30
assessed the potential negative consequences on
25 0.4
trade, economic growth and corporate finances,
20
particularly for firms most exposed to trade. 15
0.3

Eurostoxx600 lost 13% amidst spiking volatility, 10

0.2

while both EU sovereign and corporate spreads 5

0.1

widened. Following the 9 April partial 90-days 0 0.0

suspension of the initially announced tariffs (see Jan-23 May-23 Sep-23 Jan-24 May-24 Sep-24 Jan-25 May-25

Graph I.3.6 and I.3.7), investor risk appetite VIX (7-day moving average) ECB stress indicator (rhs)

progressively resumed on expectations for Sources: S&P Global, LSEG, Bloomberg, ECB.
reasonable trade agreements to be reached in the
coming months. Similarly, hopes for a trade agreement between the US and China boosted further
investor confidence. By the beginning of May, the losses on the Eurostoxx600 since 2 April had
been erased while bond spreads narrowed back.
Bank lending activity continues its modest
Graph I.3.9: Corporate market funding
recovery as lower policy interest rates pass
through to the private sector. While financing 10 %
costs for the euro area private sector have been
8
trending down since the beginning of the year,
they remain relatively high, standing above 6

3.50% at the beginning of this year for both 4

households and non-financial corporations.
Measures of real financing costs for non-financial 2

corporations and households have remained in 0

positive territory and above their long-term
-2
average. Growth in bank lending in the euro area Jan 22 Jul 22 Jan 23 Jul 23 Jan 24 Jul 24 Jan 25
has remained overall subdued, with 2.6% annual
Bonds Equities Bank lending
growth in March for loans to the private sector.
Corporations continue to extend their external Source: ECB.
funding needs to the market, with growth of bond
issuance in March slightly outpacing growth of bank lending. Despite anaemic credit flows to
households, EU housing markets recovered last year with a rebound in house prices (see Box I.3.1).

24
 Economic outlook for EA and EU

The latest ECB bank lending survey for 2025-Q1 (5) points to further divergence between
lending conditions to firms and for mortgages. Banks reported a small further net tightening
of credit standards for loans to firms and consumer loans, driven by higher perceived risks. By
contrast, credit standards eased moderately for housing loans, owing to higher competition. As
regards loan demand, banks reported a renewed slight net decrease from firms after two quarters
of weak recovery. The decrease was driven by a negative contribution from inventories and
working capital. By contrast, net demand for housing loans continued to increase strongly, while
consumer credit demand increased moderately, both supported mainly by declining interest rates.
Looking forward to the second quarter of 2025, banks expect a net tightening of credit standards
coupled with an increase in demand across all three loan segments. The ECB’s Survey of Access to
Finance of Enterprises (SAFE) for the first quarter of this year corroborates banks’ views expressed
in the ECB’s bank lending survey: firms reported a further decrease in bank loan interest rates,
while indicating a tightening of credit conditions. SAFE respondents confirmed the slight decrease
in demand by firms as they reported a small reduction in the need for bank loans.
Overall, EU financial conditions appear tighter now compared with autumn. While
expected policy rates have shifted downwards, long-term interest rates are now (at the cut-off
date of the forecast) expected higher than in autumn, in both nominal and real terms. Moreover,
bank lending conditions for corporates continued to tighten in the first quarter of this year and
further tightening is expected in the second quarter, largely on account of lower tolerance to risk.
The cautious approach from banks towards lending is mainly motivated by the perceived risks
towards the macro-economic situation and is not related to metrics of asset quality, nor banks’
financial situation, which keeps showing strong profitability, solvency and liquidity. Corporate
bankruptcy stabilised over the last year amidst still very low levels of non-performing loans,
suggesting solid asset quality on banks’ balance sheets. Market-based indicators of risk such as
equity prices or bond spreads have been very volatile in the context of heightened uncertainty
linked to the US trade policies. This in turn is likely to lead to tightening financial conditions over
the forecast horizon.

(5)
Available at
https://www.ecb.europa.eu/stats/ecb_surveys/bank_lending_survey/html/ecb.blssurvey2025q1%7Edd155b616a.en.html

25
 European Economic Forecast, Spring 2025

Box I.3.1: Signals of a turnaround in the housing market

After falling in the second and third quarter of Graph 1: Housing prices and price-to-income
2023, housing prices started growing again in ratio, EU
2024. After rising steadily since 2013 and picking up 170
Index,
in the aftermath of the pandemic crisis, nominal 160
2013=100
house prices in the EU experienced a mild decline in
150
2023. This decline was more pronounced in real
140
terms – that is, when adjusting for inflation (using the
private consumption deflator) and relative to 130

household gross disposable income (see Graph 1). By 120

end 2023, however, nominal house prices had 110

broadly recovered their losses and increased more 100
vigorously in 2024. The price recovery was 90
accompanied by a recovery in transactions, to a level 14-Q4 16-Q4 18-Q4 20-Q4 22-Q4 24-Q4

comparable to that recorded in the pre-pandemic Nominal house price Real house price
Price-to-income
years. By 2024-Q4, nominal house prices in the EU
were 4.9% higher than a year earlier, surpassing the mid-2022 peak. In real terms, the price increase
was more modest, but still 2.1% over the year. The magnitude of the increase varied considerably
across Member States (see Graph 2). Bulgaria, Hungary, Portugal, Spain, the Netherlands, Poland, and
Croatia recorded annual growth rates above 10% in 2024-Q4. At the other end of the spectrum,
Sweden Germany, Austria, and Luxembourg — which experienced more significant contractions in 2023
— recorded more modest gains. France and Finland, in contrast, continued to see year-on-year declines.

Graph 2: Nominal house price growth, 2023-Q4 and 2024-Q4

20 % change y-o-y

15

10

-5

-10

-15
EL

AT

EU
HU

ES

HR

EE

EA
CY
NL

IE

CZ

IT

LU
FR
FI
BG

SI

LV
SK

RO
DK

BE
SE

DE
PT

PL

LT

MT

2023-Q4 2024-Q4

The fall in housing prices was largely driven by weakening borrowing capacity. Since most
home purchases are financed through mortgage credit, households’ borrowing capacity has historically
been a key long-term driver of house demand and house prices. It is driven by household incomes,
mortgage rates and other factors such as housing-related taxes and benefits. When the borrowing
capacity weakens, prospective homebuyers may face larger required downpayments or simply be
denied access to credit. They may also scale down or postpone the decision to buy a house. Households’
borrowing capacity fell sharply in 2022 and 2023, as the increase in household incomes was not
sufficient to offset the negative impact of surging interest rates (see Graph 4). This was reflected in a
sharp contraction of mortgage credit flows and ultimately falling prices.

(Continued on the next page)

26
 Economic outlook for EA and EU

Box (continued)

Home buyers have to cope with high house Graph 3: Mortgage flows and house price
prices relative to their borrowing capacity. After index, euro area
the pandemic, the ratio between house prices and 12
households’ borrowing capacity – which can be 10 % y-o-y change

considered an indicator of housing affordability that 8

explicitly takes the cost of mortgage lending into 6
account - increased sharply in the EU (dark blue line
4
in Graph 4). Initially, this was due to the surge in
2
house prices, but then also the decline in borrowing
0
capacity, as interest rates rose. With interest rates
-2
falling, the borrowing capacity of households
-4
rebounded strongly in 2024, outpacing the recovery
-6
in housing prices. Still, the affordability index remains 07-Q1 10-Q1 13-Q1 16-Q1 19-Q1 22-Q1 25-Q1
well above its long-term average. As shown in Graph Bank loan stock for house purchase House price index
5, the increase in real house prices has outpaced
households’ borrowing capacity in most EU countries Source: ECB.
over the past five years, highlighting increasing
difficulties for households to afford housing via mortgage credit.

Graph 4: House prices over borrowing capacity Graph 5: Borrowing capacity vs real house
ratio, and contributions to borrowing prices, 2019 to 2024-Q4
capacity change, EU
50
15 pps. contr. annual Index, 2013=100 130
% change EL
10 120 PT
LT 25 SI HR
Real house prices % change

5 110
EE PL BG
0 100 NL
CZ DK HU ESIE MT
-5 90 SK LV 0
LUAT BEIT CY
-10 80 FR
SE DE
-15 70 FI RO
-25
-20 60

-25 50 Line of equal

14 16 18 20 22 24 change
-50
Tax&Ben contr -50 -25 0 25 50
Mortgage rate contr
Borrowing capacity % change, adjusted for inflation
Income contr
Total borrowing cap. change Source: ECB.
Source: ECB.
The sharp decline in housing supply since 2022 Graph 6: House supply indicators, EU
has contributed to the rebound in housing 160
Index,
2015=100
prices last year. Following the interest rate hikes in
2022, housing completions in the EU plummeted (see 140

Graph 6). Similarly, building permits fell sharply in

2022 and have remained at very low levels since, 120
suggesting that new housing supply will stay limited
in the near future. This low supply can be attributed
100
to high interest rates and elevated construction costs,
but also structural constraints such as stringent
environmental regulations and limited availability of 80
14-Q4 16-Q4 18-Q4 20-Q4 22-Q4 24-Q4
buildable land. In many Member States, the Construction prod. price Building permits, m2
constrained supply of new housing has become one House completions
of the main drivers of continued house price growth.

Going forward, further improvements in households’ borrowing capacity are set to foster
housing demand, amid increasing prices (see Graph 7). After an improvement in 2024, households’
borrowing capacity in the EU is expected to improve further in 2025 and 2026, driven mainly by positive
contributions from household incomes – as real wages are projected to increase by 1.6% this year and
1.1% in 2026. Rising house prices provide a positive signal to housing developers. Indeed, housing

(Continued on the next page)

27
 European Economic Forecast, Spring 2025

Box (continued)

investment is set to start growing again this year. Still, the supply of new housing is set to respond
with a lag to lower financing costs and higher prices.

Graph 7: EU house price index and household Further increase in house prices are set to lift
income confidence, but also to widen the gap between
homeowners and renters. Real house prices and
180
Index,
2013=100
the price-to-income ratio are still below their 2022
160 peak. This may have contributed to dampening
consumer sentiment by reducing the real value of
140 household wealth for homeowners and, in turn,
maintaining upward pressures on the saving rate, as
120
households try to rebuild wealth buffers eroded by
100
inflation. This effect is more pronounced in countries
with higher homeownership rates and where
80 housing wealth plays a larger role in household
13 14 15 16 17 18 19 20 21 22 23 24 25 26
balance sheets. (1) A faster recovery in real estate
Adjusted disposable income per capita
prices therefore heralds a more dynamic
Nominal house price
consumption growth. At the same time,
deteriorating affordability widens the gap between homeowners and non-homeowners, dampening the
prospects of the latter to access property.

(1)
See: What explains the high household saving rate in the euro area? And
Why are euro area households still gloomy and what are the implications for private consumption?

28
4. ECONOMIC ACTIVITY

The EU economy ended 2024 on a solid Graph I.4.1: Real GDP growth and its demand
footing and kept momentum in early 2025. contributions, EU

In the fourth quarter of 2024, economic activity 1.5 q-o-q %, pps.

increased by 0.4% on the previous quarter in the forecast
EU and by 0.2% in the euro area. This, coupled 1.0
with positive backward data revisions, pushed
2024 real GDP growth to 1% in the EU and 0.9% 0.5
in the euro area - a notch above the Autumn 0.0
Forecast. The positive momentum was kept in the
first quarter of this year, with GDP expanding by -0.5
0.3% in the EU and 0.4% in the euro area in
2025-Q1 (6). This, together with a stronger-than- -1.0
22-Q4 23-Q2 23-Q4 24-Q2 24-Q4 25-Q2 25-Q4 26-Q2 26-Q4
expected carry-over from 2024, set acquired Private consumption Public consumption
growth at 0.8% for the euro area and 0.9% for GFCF Net exports
the EU – a modest yet solid starting point as the Changes in inventories GDP
GDP forecast (AF24) Imports of goods, inverted
trade headwinds were about to intensify.
According to fragmented information from national sources, growth was driven by higher
household consumption, non-residential investment and exports of services. On the production
side, industrial production increased by 1.5% on the quarter before, with notable increases in
pharmaceuticals and other consumer goods, the automotive sector as well as intermediate
products. A strong Q1 for Ireland (3.2% q-o-q) appears to have again been fuelled by the
multinational-dominated sectors and likely reflects some frontloading of exports. Net of Ireland,
acquired growth for the EU at the first quarter of 2025 stood at just 0.7% (0.5% for the euro
area).
At 1% in the EU and 0.9% in the euro area, Graph I.4.2: Demand side components, EU excl. IE
real GDP growth in 2024 was a notch above Index, 2019-Q4=100
120
the autumn projections. Growth was strongest, Domestic HH Investment Exports Imports
well above 3%, in Malta, Croatia and Denmark, consumption
115
while economic activity in Austria (-1.2),
Latvia (-0.4%) and Estonia (-0.3%) contracted.
110
Among the largest Member States, real GDP
growth ranged from -0.2% in Germany to 3.2% in 105
Spain. Deviations from the AF24 were notable in
several Member States, partly also because of 100
data revisions. Ireland, Denmark and Sweden
22-Q4

23-Q4

24-Q4
22-Q4

23-Q4

24-Q4
22-Q4

23-Q4

24-Q4
22-Q4

23-Q4

24-Q4

performed significantly better than expected,

while Germany, Austria and Romania performed Total Durable goods

below projections. Services & less durable goods Machinery, equipment, others

Construction Goods
Public consumption grew at a brisk pace in
Services
2024. The volume of government consumption
Notes: (1) Domestic household consumption includes
increased by 2.7% in 2024 in both the EU and the consumption spending by both residents and non-residents.
euro area, contributing 0.6 pps. to real GDP (2) IE excluded to limit volatility in investment, exports and
growth (see Graph I.4.1). The expansion was imports.

broad-based across Member States and surprised

(6)
Eurostat’s preliminary flash estimate of GDP growth for the first quarter of 2025, based on data for 18 Member States,
covering 94% of euro area GDP and 93% of EU GDP. On 15 May 2025 – after the cut-off date of this forecast -,
Eurostat released new estimates (flash estimates) for GDP and employment in 2025-Q1, based on Member States’
data covering 99% of the euro area and EU GDP. Seasonally adjusted GDP was reported to have increased by 0.3% in
both the euro area and the EU (thus a notch lower than the previous estimate for the euro area). See
https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-15052025-ap.

29
 European Economic Forecast, Spring 2025

on the upside relative to the Autumn Forecast in most Member States. Employment growth in the
government sector, e.g. in public administration, (adult) education and the care sector, underscores
the volume increase in government consumption.
Private consumption expanded on the back Graph I.4.3: Sources and use of real disposable income of
of solid gains in real disposable income households

Expanding employment and strong wage pps., y-o-y %

increases amid easing inflation have been 109
boosting real household incomes over recent 8
quarters. In 2024, households’ real disposable 7
forecast
6
income increased by 2.6.%, despite a negative 5
contribution from net transfers as the increase of 4
3
taxes and contributions related to the improved 2
labour incomes outpaced that of social transfers, 1
(see Graph I.4.3), also reflecting the phasing out 0
-1
of pandemic and energy support measures. -2
Remarkably – and in contrast with other -3
2022 2023 2024 2025 2026
economies - despite the large changes in
Net transfers Other income
mortgage and credit rates, net interest income Wage growth Employment
(and the broader aggregate of other income) was Disposable income Consumption
barely affected (see Box I.4.2). Private Disposable income, nominal

consumption growth picked up speed in the

course of 2024, reaching 0.6% q-o-q in 2024-Q4 and leaving the volume of consumption for 2024
1.3% above the level of 2023 (see Graph I.4.2). This is 0.2 pps. better than the Autumn Forecast.
Consumption growth surprised on the upside in most of the large economies, with Germany being
a notable exception.
Still, weak confidence, the legacy of high Graph I.4.4: Consumer confidence, EU
inflation and high interest rates kept
percentage
savings elevated. Households kept saving a 0 balance

high share of their income, for a variety of -5

reasons. Precautionary savings were fuelled by
elevated uncertainty, and the persistent effect of -10

the recent high inflation spell on consumers’ -15

spending attitudes. At the same time, high, if
declining, interest rates continued to support the -20

financial returns from savings, especially for the -25

higher income groups. In 2024-Q3, the saving
rate of households came down for the first time -30
21-Q1 22-Q1 23-Q1 24-Q1 25-Q1
since mid-2022, from 14.7% to 14.4%, but Consumer confidence
settled at 14.5% in 2024-Q4, remaining above its
pre-pandemic average.
Investment, in contrast, contracted sharply, though the EU aggregate masks important
heterogeneity. Its level in 2024 declined by 1.9% in the EU relative to 2023 (0.2 pps. more than
projected) and by 1.8% in the euro area (as expected), with declines reported for 18 Member
States. In addition to Ireland (-25%), where dynamics are volatile due to activities of
multinationals, contractions were particularly deep in Hungary (-11%), Latvia and Estonia (-7%
each), while investment expanded in i.a. Spain, Greece, Portugal, Italy, Belgium, Denmark, Croatia.
Excluding Ireland, the decline was milder, but still significant, at -1.1% in the EU and -1% in the
euro area.
Housing investment kept contracting throughout the year. Investment in housing decreased
by 4.2% in the EU and by 4% in the euro area, 0.6 and 0.7 pps., respectively, lower than projected.
Twenty Member States reported a decline. Save for a short-lived uptick in early 2023, residential
construction has been downsizing virtually for two and half years. Still, a rebound in real estate

30
 Economic outlook for EA and EU

prices and a pick-up in lending for mortgage loans suggests the nearing of a turning point (see Box
I.3.1).
Investment in equipment was held back by Graph I.4.5: Investment contribution to GDP growth, EU
weak demand, elevated uncertainty and still % or pps.,
1.0
tight financing conditions. Although corporate y-o-y
forecast
balance sheets have remained solid, with
0.5
leverage ratios near historical lows, profitability
has been dented in 2024 by weak demand as
0.0
well as rising labour and high funding costs.
Moreover, cyclical pressures from the global -0.5
manufacturing downturn, less competitive energy
prices, and uncertainty over global trade policies -1.0
remained a drag on equipment investment – 2022 2023 2024 2025 2026

particularly in manufacturing. As a result, Dwellings Other construction

equipment investment declined by 2.2% in the EU Equipment (w.o. vehicles) Vehicles
Intellectual property (IP) Total excl. IP
(as expected) and by 2.6% in the euro area, 0.3 Total fixed assets
pps. more than expected (see Graph I.4.5). The Notes: Equipment includes vehicles in forecast.
decline was concentrated in Germany and France
(though by less than expected) as well as Italy and Hungary (where the decline was stronger).
Excluding vehicles, equipment investment declined by even more, 2.7% in the EU and the euro
area. Investment in transport equipment moved sideways across quarters in 2024, as the bumper
growth of 2023 (averaging more than 10%) was no longer sustained in e.g. Germany, France, Italy,
Austria.
Investment in intellectual property was remarkably buoyant. The decline in other
investment (chiefly intellectual property products) was 1.5% in the EU and 1.8% in the euro area.
Excluding Ireland, where the decline was 47%, again reflecting transactions by multinationals, this
category of investment increased by 2.6% in the EU and 3% in the euro area. Most growth came
from, but was not limited to, Germany and France, possibly reflecting the digitalisation in corporate
and public sector but also the response to broader transformation needs of EU firms.
Investment in non-residential construction proved resilient, propped up by buoyant
public investment. Its expansion was slightly less than projected in the EU (0.7%, 0.1 pps.
weaker) but surprised on the upside in the euro area (1.7%, 0.7 pps. stronger). Most of the growth
came from activity in Italy, Spain, France and Sweden, while Germany posted a small decline.
Investment in non-residential construction, also supported by the Recovery and Resilience facility,
rebounded in 2024-Q2 and even strengthened in 2024-Q4.
Imports rebounded while exports weakened in the course of 2024. Net exports had an
overall positive, but smaller than projected, contribution to GDP growth in 2024. Adjusting for the
volatility of external trade in Ireland (7), exports overall stagnated in 2024 (0.3% EU, -0.1% euro
area), dragged down by goods (-0.5% EU, -1% euro area). Excluding Ireland, imports also
stagnated for the year as a whole (0.2% EU, -0.2% euro area). Thus, the contribution of net exports
was broadly neutral for the aggregates excluding Ireland. In contrast to goods, service exports
increased (3.1% in the EU, 3.3% in the euro area) but the increase was neutralised by service
imports (3.6% EU, 3.4% euro area). Data on trade in goods suggests weakness in exports across all
broad categories.
Turning to the production side, 2024 was marked by continued weakness in
manufacturing and construction. Value added in industry has stagnated since mid-2023.
Production by the intermediate goods sectors (which are mostly energy intensive) contracted
throughout the year, with the burden of high production costs compounded by weak demand from
the construction sector and the machine-building industries. Less energy-intensive industries have
(7)
The accounting impact on GDP growth from the movements in intellectual property products in Ireland was mirrored by
movements in exports/ imports.

31
 European Economic Forecast, Spring 2025

also suffered under weak demand. Machine building in general, including the automotive industry,
has seen output decline throughout 2023 and 2024, reflecting cyclical and structural issues (see
Graph I.4.7). The Commission’s surveys for the manufacturing sector show that managers’
assessment of their firm’s competitive position on international markets, particularly outside the
EU, failed to recover from the major deterioration in the wake of the energy crisis, and in April it
was still very close to its all-time low reached in October 2024. This trend is particularly relevant in
Germany, but lately it has spread to other Member States. Manufacturing of other transport
equipment (non-automotive) has been steadily recovering from a deep slump following the COVID-
19 pandemic. It regained the pre-pandemic level of output in late 2023. The expansion was
progressing throughout 2024 but has stalled in early 2025 (see Graph I.4.7). 2025-Q1 saw a mild
rebound in the automotive sector. It is too early to judge whether this is a durable turnaround, as
new car registrations have not moved up relative to late 2024, and the uptick could have been an
attempt to front-load deliveries ahead of increased US tariffs. The sector of non-durable consumer
goods appears more sheltered from the still bearish sentiment characterising most other
manufacturing sectors and has enjoyed a massive rebound. This trend is driven by the
pharmaceutical industry, which is running at historically high volumes (notably in Ireland) close to
double the level of 2019 and keeping manufacturing from an outright decline. In construction,
though certain activities benefitted from the buoyant investment in non-residential construction
(see Graph I.4.7, right panel), the still declining housing investment continues to weigh on overall
value added in the sector (see Graph I.4.6).
Graph I.4.6: Gross value added in the EU across sectors

115 Index,
2019-Q4=100
110

105

100

95

90

85
21-Q4
20-Q4

22-Q4

23-Q4

24-Q4
20-Q4

21-Q4

22-Q4

23-Q4

24-Q4
20-Q4

21-Q4

22-Q4

23-Q4

24-Q4
20-Q4

21-Q4

22-Q4

23-Q4

24-Q4
20-Q4

21-Q4

22-Q4

23-Q4

24-Q4

Industry (18.4%) Construction (5.1%)

Distribution and consumer services* (21.9%) Other mkt. services (34%)
Public services (19.4%) TOTAL 2024-Q4

Notes: % of GVA in latest four quarters in brackets.

*Wholesale and retail; transport; accommodation, food services; arts, entertainment, recreation.

The service sector was the only driver of growth. Activity in business services remained
buoyant in 2024 (see Graph I.4.6). Together with a rebound in distribution services - trade,
transport - and consumer services - hospitality, recreation and entertainment, this made up for the
weakness in industry. Readings of the services PMI and the European Commission’s services survey
were in expansionary territory throughout 2024.
Looking forward, consumption is projected to stay the key growth driver but remains
constrained by a still elevated saving rate. Continued gains in employment and wages and
decelerating inflation should support a further increase in household gross disposable income.
However, the relapse in consumer confidence in March – and more markedly in April, to an 18-
month low – suggests that households are also affected by the current trade tensions and policy
uncertainty, primarily due to fears of a worsening general economic outlook (see Graph I.4.4).
Rather than job security, households appear primarily concerned with the high cost of living (see
Special Issue 2). This concern likely reflects the legacy of the recent inflationary experience, which
significantly eroded the purchasing power of consumers (in late 2024, real wages were only at
their level of 2021-Q3) and left prices for essential goods and services significantly higher.

32
 Economic outlook for EA and EU

Moreover, while conditions for continued easing in inflation exist, consumers’ expectations of price
increases have surged since October 2024. In this context, consumption may continue to be held
back by precautionary saving motives, as well as efforts to rebuild wealth buffers following the
erosion of financial wealth by inflation and the still incomplete recovery in real estate valuations
(see Box I.3.1). The saving rate is thus projected to decline more gradually than previously
expected, from 14.8% in 2024 to 14.2% in 2026. Real private consumption is therefore forecast to
grow by 1.5% this year, with further strengthening expected in 2026.
Graph I.4.7: Short-term indicators, EU

110 Index 3m rolling, 90

120 190 Feb-2020=100
85
110 170

105 80
100 150
75
90 130
Index 3m rolling, 100 70
80 Feb-2020=100 110
65
70 90
21/07

22/01

22/07

23/01

23/07

24/01

24/07

25/01

95 60

Other vehicles Other equimpent

Intermediate Industrial production Production in construction Retail trade
Car registrations (rhs)
Motor vehicles Pharmaceutical (rhs)

Notes: All data are seasonally and calendar adjusted.

Sources: ACEA; European Commission.

Elevated uncertainty continues to exert a drag on investment growth. Following the

contraction of 1.9% in 2024, gross fixed capital formation is expected to expand over the forecast
horizon. At 1.5% in 2025 and 2.4% in 2026, the rebound and subsequent acceleration is now
expected to be considerably more muted than projected in autumn. Lower export growth is set to
depress capacity utilisation in manufacturing, defeating a timid recent uptick, and lowering
investment needs. Moreover, uncertainty increases the option value of postponing investment and
reduces confidence among firms. Finally, financing conditions, are set to be tighter than assumed
in autumn (see Section 3). Equipment investment is projected to bear the brunt of this adverse
environment, barely expanding this year and achieving only a modest acceleration in 2026.
Residential construction is set to bottom out in 2025, and the stage seems set for an expansion in
2026 as credit conditions for households do appear slightly more favourable than for corporates.
Infrastructure investment on the one hand and intellectual property products (R&D and ICT) on the
other hand, are the two categories set to expand more vigorously – partly supported by RRF and
the deep digital transformation needs of businesses.
Lower external demand for EU goods detracts from EU economic growth. Exports by the
EU are expected to grow by a meagre 0.7% this year and 2.1% in 2026. This is a sizable downward
revision from autumn (2.2% and 3.0% respectively), largely driven by lower global demand for
goods and price competitiveness losses on the US market. The appreciation of the euro and other
EU currencies vis-a-vis the dollar and other currencies is set to amplify these effects. At the same
time, the EU is expected to gain market shares in the US from other trading partners facing higher
tariffs. Export growth is also constrained by the elevated trade uncertainty. While there is evidence
that EU firms do adjust their trade strategies in response to geopolitical tensions and trade
fragmentation (see Special Issue 2), in an uncertain trade environment many of them may hesitate
to bear the costs associated with product adaptation, regulatory compliance and the search for
new distribution networks, necessary to redirect exports to alternative markets. Growth in imports
of goods and services has also been revised downward in line with lower export growth and
weaker domestic demand, even if increasing price competitiveness pressures from the partial re-
routing of the US-Chinese trade and the appreciation of the euro provide some support to imports.

33
 European Economic Forecast, Spring 2025

As a result of these developments, in 2025, net external demand is set to detract almost 0.5%
from growth, but the drag is set to fade out in 2026.
Graph I.4.8: ESI/Confidence and PMI, euro area

60 Industry Services Construction

Composite
58
56
54
52
50
48
46
44
42
40
Apr-24
Apr-22

Apr-23

Apr-24

Apr-25
Apr-22

Apr-23

Apr-25
Apr-22

Apr-23

Apr-24

Apr-25
Apr-22

Apr-23

Apr-24

Apr-25
PMI ESI/ Confidence

Notes: EC BCS series rescaled to align interpretation to PMI: Confidence'=50+0.5*Confidence; ESI'=ESI/2. The Economic Sentiment Indicator
(ESI) has broader coverage than the composite PMI. In addition to services and industry it includes retail, construction, and consumers.
Sources: S&P Global, European Commission.

Overall, real GDP growth is seen to maintain the pace observed in 2024 and pick up in
2026. Real GDP growth in 2025 is projected at 1.1% in the EU and 0.9% in the euro area –
broadly the same growth attained in 2024. This is a substantial downgrade with respect to the
autumn projections, which largely reflects the impact of higher tariffs and elevated uncertainty
ushered in by the trade protectionist turn of the new US administration. Growth in the EU is
nonetheless expected to pick up to 1.5% in 2026, as consumption keeps expanding and investment
accelerates after rebounding in 2025. Growth in the euro area is set to attain 1.4% in 2026.
Graph I.4.9: Growth dispersion and convergence

a. GDP level relative to 2024 b. Per capita GDP at PPP: change in percentage
AT points of EU average since 2023
MT110 DE DK
PL IT
HR BE AT PL
LU BG
DE 4 LT
IE FR
LT 100 EA BE HR
0
FI MT
CY FI
FR -4 EL
DK 90
LV
IT -8 CZ
ES NL
EA CY
EL EU
SE SK
SI SK
EE RO
BG SE IE ES
CZ HU SI PT
PT LU RO EE HU NL
LV
2024 2025 2026 2023 2024 2025 2026

Importantly, most Member States are expected to return to growth in 2025. Only Austria
(-0.3%) is projected to contract and Germany to stagnate. France and Italy are expected to grow
just below average, while Spain and Poland are projected to grow robustly. Malta, Croatia and
Denmark are the countries with the strongest growth projections for the current year. In 2026, all
Member States are expected to grow by close to 1% or more, with growth being weakest in
Belgium and Italy (0.9%). France and Germany are projected to grow below average, while Poland
(3%) and Malta (4%) are set to grow the strongest. With economic expansion in the southern and
central EU still outpacing growth in north and western Europe, economic convergence in the EU is
expected to progress further (see Graph I.4.9).

34
 Economic outlook for EA and EU

Growth is estimated to stay below potential Graph I.4.10: Output gaps across Member States
in 2024 and 2025, but outpace it in 2026.
4 OG narrows OG widens
The output gap has widened in 2024 to -0.4% of OG negative OG positive
potential output in the EU (-0.3% in the euro 3

Change of output gap 2024-26 (pps.)

EE
area). It is estimated to widen to -0.6% (-0.5%) in
2
2025 and narrow to -0.3% in 2026 (0.2% in the
euro area). Thirteen Member States are estimated 1 LU FI CZ DK
HU
LT PL EL
IE
to have negative but narrowing output gaps SE DE
RO AT EU ES
0 EA
between 2024-26. Eight Member States are LV FR PTIT SI
NL
estimated to have positive output gaps -1 MT
BE
SK BG CY
HR
throughout the forecast horizon (See Graph
-2
I.4.10). Based on the projected evolution of OG widens OG narrows
demographics, employment and investment, -3 OG negative OG positive
-5 -4 -3 -2 -1 0 1 2 3
potential growth is set to slow down in the EU Output gap 2024 (% of potential GDP)
from 1.4% in 2024 to 1.2% in 2026 (in the euro
area, from 1.2% to 1.1%). This trend is similar across most Member States.

35
 European Economic Forecast, Spring 2025

Box I.4.1: The potential economic impact of the reform of Germany’s fiscal framework

In March 2025, Germany adopted a constitutional reform of its national fiscal framework, with three
major novelties. First, a new infrastructure fund, worth EUR 500 billion (11.6% of 2024 GDP), was set
up outside the scope of the ‘debt brake’ (1). The fund is intended to finance new projects in the fields
of transport, healthcare, energy, education, research and digitalisation. Projects financed by the fund
can be approved within 12 years. Second, defence spending above 1% of GDP is excluded from the
calculation of the ‘debt brake’. Third, the Länder are allowed to take up new net borrowing of up to
0.35% of GDP annually, as was the case at the federal level. This eases the previous requirement of
the Länder to run balanced budgets.

The aim of the new infrastructure fund is to address Germany’s large investment needs, and as such
it has the potential to significantly boost economic growth over the next decade. At the cut-off date of
this forecast, plans for increased spending from the infrastructure fund and for defence based on the
adopted reform were not deemed sufficiently detailed to be included in the baseline projections. In
particular, they had not yet been formalised in a supplementary budget. The baseline forecast
presented in this publication is therefore complemented by stylised model simulations, based on the
QUEST model, to assess the potential economic impact of the reform.

Assuming that the infrastructure fund is fully debt-financed and allocated to productive projects, and
factoring in a linear spending profile starting in the second half of 2025, the model simulations show
that compared to the baseline, Germany’s GDP would be around 1¼% higher by the end of this
legislative term (2029) and 2½% higher by 2035 thanks to the fund’s investments. This reflects a
long-lasting expansion of economic activity driven by an increase in capital stock and productivity. The
impact on public debt would be relatively contained, provided the investment yields high productivity
gains and boosts growth, with public spending rising below GDP growth. (2) The debt-to-GDP ratio would
be around ½ percentage point higher in 2029, rising to 3¼ percentage points above baseline in 2035. (3)
The increase in investment would also have positive economic spillovers to other EU Member States: EU
GDP would be lifted by ¾% in 2035, with around one-third of this impact due to spillovers.

The growth benefits of focusing on productive investments can be further illustrated by comparing the
above results with an alternative scenario, in which half of the additional spending from the fund would
finance (unproductive) public consumption. In this case, the impact on German GDP would be
significantly smaller, amounting to ¾% of GDP in 2029 and 1¼% of GDP in 2035. This more muted
impact reflects a smaller increase in overall production capacity, with knock-on effects on private
demand. The debt-to-GDP ratio would be around 1½ percentage points higher in 2029 and 5½
percentage points higher in 2035 than in the baseline.

As long as the emphasis on productive use is maintained, a speedy fruition of the fund would yield the
most economic gains. This however requires addressing other investment bottlenecks than just
financing, such as those related to labour supply, the efficiency of planning and permitting procedures,
institutional complexity and administrative capacity.

As to the new possibility for the Länder to increase their deficit and for Germany to increase defence
spending outside the scope of the debt brake, their impact on economic growth may be smaller, as
there is no requirement to spend these two new sources of fiscal space on productive investment.

(1)
The ‘debt brake’ is a German fiscal rule embedded in the federal constitution (Basic Law for the Federal Republic
of Germany). Before the reform, it limited annual net new borrowing of the federal level to 0.35% of GDP.
(2)
To isolate the effects of the increased investment, we assume that debt is stabilised only in the long run. No
discretionary fiscal adjustments are introduced within the horizon of reported results.
(3)
The simulation results are based on highly stylised and simplified assumptions. Their interpretation comes with
important caveats, particularly regarding the uncertain productivity of government investment, the assumed
absence of spending and implementation delays, and the response of other public spending. For additional
analysis on these factors and alternative assumptions in the QUEST model, see Motyovszki G., Pfeiffer, P., & in
‘t Veld, J. (2024), “The Implications of Public Investment for Debt Sustainability”, European Economy Discussion
Paper 204.

36
 Economic outlook for EA and EU

Box I.4.2: The impact of interest rate changes on euro area households' net interest income

This Box analyses the impact of interest rate Graph 1: ECB policy rate and interest rates for
changes on the net interest income of households
households in the euro area. Between July 2022 7 %
and September 2023, the ECB deposit facility rate
6
increased from 0.50% to 4% (see Graph 1).
5
Compared to previous tightening phases in the euro
4
area, the strength and speed of the monetary policy
tightening was unprecedented. The ECB started 3

lowering its policy rate again in June 2024, and by 2

April 2025 it stood at 2.25%. Changes in the main 1

policy interest rate directly affect households’ 0
disposable incomes via interest payments and -1
receipts on interest-bearing instruments (see Graph 03 05 07 09 11 13 15 17 19 21 23

1). The analysis in this Box examines the dynamics of Implicit interest rate of outstanding loans to HH
Implicit interest rate of deposits of HH
net interest income for the euro area household
ECB deposit facility rate
sector on aggregate and by income groups. In a
Source: ECB.
context of a high cost of living, the rise in interest
rates sparked concerns about the resilience of households, in particular low-income households with
outstanding mortgages at flexible interest rates. In fact, household disposable income appears to have
hardly been affected by the surge and subsequent fall of interest rates.

Households’ net interest income tends to be negative. Net interest income is the difference
between the interest payments households receive on their fixed income financial assets (mostly
deposits and bonds), and the interest payments they make on their liabilities, mostly mortgage loans.
Households in the euro area on aggregate have a positive net financial asset position, including with
regard to interest-bearing instruments. (1) However, as the interest rates paid on loans exceed those
earned on deposits, households’ net interest income tends to be marginally negative (see Graph 2). In
2024, it stood at around -1% of gross household disposable income (GHDI).

Following a decline and subsequent stability in Graph 2: Net interest income, household sector,
the period leading to and following the global euro area
financial crisis, household net interest income 6 % GHDI
turned less negative over 2020-2024. Net
5
interest income (as a % of GHDI) declined in the
4
aftermath of the financial crisis and broadly
3
stabilised thereafter, in an environment of low
2
inflation, low interest rates and gradual household
1
deleveraging. In 2020, net interest income in the euro
area turned less negative, as interest receipts 0

bottomed out while interest payments continued to -1

decline. This coincided with a strong increase in -2

households’ savings (due to forced as well as -3

02-Q1 05-Q1 08-Q1 11-Q1 14-Q1 17-Q1 20-Q1 23-Q1
precautionary saving) in the wake of the pandemic.
Net interest income Interest payments
As of 2022, net interest income grew by slightly more
Interest receipts
than 0.5 pps. of GDHI over 2020-2024 in the euro
area, benefitting from the increase in interest rates. Notes: Data reflect smoothed quarterly data.

(1)
Interest-bearing instruments considered in this note are deposits and bonds on the assets side, and loans on
the liabilities side. They exclude other financial assets (such as equity, pension and insurance savings) and non-
financial assets (such as real estate). Households’ financial assets in the euro area are mostly composed of
deposits, shares, and insurance/pension guarantees, each making up about one third of all their financial assets
in recent years. Over the 2010s, households saw a strong increase in their net financial asset positions, mostly
on account of equity and investment fund shares.

(Continued on the next page)

37
 European Economic Forecast, Spring 2025

Box (continued)

Despite the sharp monetary policy tightening in 2022-23, debt servicing costs and income
from savings grew only moderately. In 2022, over half of households’ deposits in the euro area
were held as overnight deposits (2), which carry relatively low interest rates and are not very responsive
to changes in policy rates (3). The remaining share of deposits were either redeemable at notice or time
deposits with a pre-agreed maturity. The high share of overnight deposits in total deposits, and inertia
in portfolio shifts, possibly due to heightened uncertainty, resulted in a limited increase in the overall
deposit interest rate, which peaked at just below 1.2% in mid-2024. On the liabilities side, the
sensitivity of rates on outstanding loans to policy rate changes has declined over time. ECB data
suggest that in 2010, around 40% of the stock of loans to households was due to have an interest
rate reset within the next 12 months; by 2024, this proportion had halved. The strong decline in credit
flows also contributed to the inertia of the implicit interest rate on the outstanding loan stock.

At the same time, households’ net position on interest-bearing instruments improved.

Households’ interest-bearing financial assets contracted from 131% to 124% of GHDI over 2022-24
as a result of high inflation (denominator impact), even if household saving rates remained above their
long-term averages. The reduction of the asset stock restrained the impact of higher policy rates on
interest receipts. In turn, the stock of loans also declined over 2022-24 from 92% to 83% of GHDI,
due to subsiding credit flows (active deleveraging) and high nominal GHDI growth (passive
deleveraging). The declining stock of loans cushioned the impact of monetary policy tightening on
interest payments and reinforced the improvement in net interest receipts.

The net position on interest-bearing financial instruments varies across income groups. (4)
Data from the 2020-21 wave of the Household Finance and Consumption Survey (HFCS) (5) suggest
that most households in the euro area have net positive asset positions when considering both financial
and non-financial assets (e.g. real estate). When looking only at interest-bearing instruments, about
two-thirds of households still have a positive net position. Almost all households have some savings,
but only around 40% of them have outstanding debt, and only 27% have mortgage debt. (6) Negative
positions on interest-bearing instruments are observed mostly among higher earning households (i.e;
households in the two highest income quintiles), who tend to have more debt, especially mortgage
debt (see Graph 3a), and less deposits (as % GHDI) as they shift a larger proportion of their wealth
into higher-yielding non-interest-bearing financial assets (such as equity and insurance and pension
savings) and non-financial assets (not shown in Graph 3). Although interest-bearing assets and
liabilities represent a fairly similar share of income across quintiles (see Graph 3a), nominal amounts
vary widely (see Graph 3b) — resulting in top earners receiving and paying much more interest overall.

(2)
The Commission’s recent communication on a “Savings and Investments Union” aims to mobilize households’
savings and encourage households to shift to financial assets with a higher return. See COM (2025) 124 final.
(3)
See Box 4 in ECB Financial Stability Review, May 2023 and Chapter 3, p. 54 in ECB Financial Stability Review,
May 2024 on the lower responsiveness of overnight deposit interest rates to policy rate changes.
(4)
For a broader discussion on the impact of high inflation on different groups of households, see Chafwehe, B.,
Ricci, M., Salto, M. and Stoehlker, D. (2025) The distributional impact of high inflation and the related policy
response, Quarterly Report on the Euro Area, 23, 2025, ECFIN, European Commission,
https://data.europa.eu/doi/10.2765/196965, JRC140748.
(5)
The Household Finance and Consumption Survey by the ECB collects household-level data on household
finances and consumption. The data used in this analysis are from the fourth wave of the survey, carried out
between the first half of 2020 and the first half of 2022.
(6)
Because mortgage loans are typically much larger than non-mortgage loans, the volume of outstanding non-
mortgage loans is only a fraction (around 10% according to MFI data) of all outstanding loans.

(Continued on the next page)

38
 Economic outlook for EA and EU

Box (continued)

Graph 3: Households' net position on interest-bearing instruments, average by income quintile 2021, euro area

120 a. in % gross income 100 b. in thousands EUR

100 80
80 60
60
40
40
20
20
0
0
-20
-20
-40 -40
-60 -60
-80 -80
-100 -100
1 2 3 4 5 1 2 3 4 5
Deposits Bonds Deposits Bonds Mortgage debt
Mortgage debt Non-mortgage debt
Net position Non-mortgage debt Net position

Notes: Income quintile 1 (5) presents the households at the bottom (top) of the income distribution.
Sources: Own calculations based on the most recent HFCS data (2020-21 round). Income quintile 1 (5) presents the households at
the bottom (top) of the income distribution.

Interest rate increases likely had a negative impact on households in the two upper income
quintiles. Assuming that the distribution of deposits and loans across quintiles is unchanged from the
one suggested by the 2020-21 HFCS data, and that interest rates on interest-bearing instruments
have evolved in a similar manner across quintiles, households in the two highest income quintiles are
likely to have been the most negatively affected by interest rate increases. These results should be
interpreted with caution, as they rest on strong assumptions. In reality, savings and lending dynamics
in the face of economic shocks diverge between income groups. (7) Research suggests that richer
households are more likely to move their savings into higher-yielding deposit types (e.g. time rather
than overnight deposits); and HFCS data suggest that the share of flexible rate mortgages decreases
with income, (8) which increases exposure to interest rate shocks for low-income households. They also
suggest that, conditional on having debt, low-income households have higher debt service burdens as
a share of their income. In addition, they tend to own less other (non-interest bearing) assets, which
could otherwise act as a buffer in the face of income shocks. At the same time, HFCS data suggest
that households with mortgage debt at flexible rates and a debt service burden above 40% of their
gross income make up less than 1% of euro area households overall, and less than 2% in the bottom
income quintile. The next round of HFCS will allow better insights into dynamics across income groups.

(7)
For instance, various studies have suggested that high-income households were more likely than low-income
households to see an increase in savings during the COVID-19 pandemic. See e.g. Friz, R., Morice, F. (2021) Will
consumers save the EU recovery? Insights from the Commission’s consumer survey. SUERF Policy Note 237, 20
May 2021; Mathä, T.Y., Montes-Viñas, A., Pulina, G., Ziegelmeyer, M. (2023) COVID-19 effects on income,
consumption and savings: evidence from the Luxembourg Household Finance and Consumption Survey. Bulletin
BCL 2023/2: 50-59. The Commission’s 2025 Alert Mechanism Report also suggests that saving rates and credit
growth have shown heterogeneous patterns across euro area countries over recent years, with the euro area
saving rate remaining above its long-term average on aggregate, while countries with already lower saving
rates before the pandemic saw a further reduction in saving rates in the face of high inflation.
(8)
The analysis considers the euro area-wide income distribution. Between country differences (e.g. in the use of
flexible rate mortgages) are likely to have a stronger impact on the results than within country differences.
Within countries, the presented variables may vary differently across income quintiles.

39
 5. LABOUR MARKET

The EU economy added 1.73 million jobs in 2024. According to national accounts, headcount
employment in the EU continued to increase last year, though at a more moderate pace than in
previous years. The annual growth rate in employment stood at 0.8% in the EU compared with
1.2% in 2023 and 2.2% in 2022. In the euro area, employment growth was slightly more dynamic
over the past three years, with 1.0% growth last year after 1.4% in 2023 and 2.4% in 2022.
Employment growth was strong in services. Graph I.5.1: Employment growth by sector and by period,
According to national accounts data, the services EU

sector created jobs for around 1.8 million workers 10 mn, difference
from 2019-Q4
in 2024. 940 000 of these were in the private 8
sector, mostly in wholesale, retail,
6
accommodation, and transport, but also IT. The
public sector also contributed significantly, with 4

jobs for 874 000 new employed persons created 2

in non-market services. 132 000 workers joined 0

the construction sector while the industry lagged of which:
-2
behind with only 71 000 new workers. The

Non market
Agriculture

Information

Professional
Industry

Construction

accom., transport
Total

Market services

Wholesale, retail,
services
agriculture sector continued to lose workers last
year, by as many as 290 000 jobholders. Looking
at the longer time period since the pandemic
crisis, the private services sector emerges as the 2021-Q4 2023-Q4 2024-Q4

most dynamic in terms of job creation. Jobs were

added in all type of services and particularly in contact-intensive services such as wholesale, retail,
accommodation and transport. Nonmarket services come second in terms of contribution to total
employment growth, while industry has shed jobs, as the losses in the aftermath of the pandemic
have not been recouped over the past two years. Employment in agriculture shrank steadily (see
Graph I.5.1).
The labour force expanded slightly less than employment – also driven by rising activity
rates. According to the Labour Force Survey, the growth rate of the population in working age
(aged 15-74) keeps tapering off. In 2024 it expanded by just 0.3% - or roughly 1.1 million people.
The labour force however increased by 0.8% - or roughly 1.7 million people. A significant share of
the expansion in the labour force therefore was driven by people entering the labour market. The
activity rate thus increased from 65.5% in 2023 to 65.8% in 2024. The employment rate of people
aged 20-64 increased further last year to reach the new record high of 75.8% in the last quarter
of 2024 after 75.5% at the end of 2023. Across age groups, it continued to increase for both
prime age workers (aged 25-54) and older workers (aged 55-64) but declined slightly for young
workers (aged 15-24). It increased for both men (80.8%) and women (70.9%).
As a result, the unemployment rate hit new record lows, amidst narrowing dispersion
across countries. The unemployment rate edged down from 6.1% in 2023 to 5.9% in 2024 and
fell further in the first quarter of this year, hitting a new record low level of 5.8% in the EU (6.2%
in the euro area). Cross country differences remain large but are narrowing as unemployment rates
are declining more in countries with high unemployment rates such as Spain or Greece. Eurostat’s
broader measure of labour market slack, which includes other groups with an unmet need for
employment besides the unemployed, continued to decline, hitting a new low in the fourth quarter
of last year (10.8% of the extended labour force aged 20-64 in the EU) (8).

(8)
This indicator measures unmet demand for work and consists of the unemployed, underemployed part-time workers,
and those available for work but not seeking work, as well as of those actively seeking work but not available to take
up work.

40
 Economic outlook for EA and EU

The severe labour shortages experienced during the post-pandemic rebound are further
easing. The job vacancy rate continued to decline throughout last year. In the fourth quarter of
2024, it stood at 2.3% in the EU (2.5% in the euro area), down from 2.6% at the end of 2023
(2.9% in the euro area). Sectors such as administrative and support services (NACE sector N),
construction (F), IT (J) and accommodation and food services (I) continue to display the highest
vacancy rates but are all at or below pre-covid levels (see Graph I.5.2). The Commission business
surveys also suggest a loosening labour market. Data for April 2025 indicate that the share of
managers reporting shortage of labour force as a factor limiting production declined further for
both industry and services. In April, this share stood at 22.9% for services, down from 25% in
January and 34.1% in the same month of 2023. In industry, it stood at 18.2%, down from 18.6%
three months earlier and 29.2% in spring 2022.
Graph I.5.2: Job vacancy rate by sector, EU Graph I.5.3: Labour market indicators, EU

6 3 z-score
%
2
5
1
4 0

-1
3
-2
Labour market loosening
2 -3

-4
1
14-Q2 15-Q4 17-Q2 18-Q4 20-Q2 21-Q4 23-Q2 24-Q4

0 Job vacancy rate EEI

B B-S C D E F G H I J K L M N
LM slack (20-64y) (inv.) Labour lim. prod. IND
2024-Q4 Peak 2019-Q4 Labour lim. prod. SERV

Notes: B-S: Industry, construction and services; B: Mining and Notes: Z-scores are used as measures and computed by
quarrying, C: Manufacturing; D: Electricity, gas, steam and air subtracting the mean from a data value and then dividing by the
conditioning supply; E: Water supply; sewerage, waste standard deviation. Mean and standard deviation are calculated
management and remediation activities; F: Construction; G: from 2000, except for the job vacancy rate and labour market
Wholesale and retail trade; repair of motor vehicles and slack. *Share of managers indicating shortage of labour force as
motorcycles; H: Transportation and storage; I: Accommodation and factor limiting production.
food service activities; J: Information and communication; K:
Financial and insurance activities; L: Real estate activities; M:
Professional, scientific and technical activities; N: Administrative
and support service activities.

Graph I.5.4: Hours worked per employee by sectors While remaining below pre-crisis levels,
hours worked per worker have increased.
105 Index, While employment growth slowed down
2019-Q4 = 100
progressively last year, hours worked per
100 employee have started to rise, particularly during
the last two quarters of 2024 (see Graph I.5.4).
95 However, average hours worked per employee
continue to hover below pre-pandemic levels.
90 Among sectors, only hours in market services are
above pre-pandemic levels while construction and
85
non-market sectors are rising but remain below
14 15 16 17 18 19 20 21 22 23 24 pre-pandemic levels. Hours worked in industry
Market services Non-market services
stagnate at low levels.
Industry Construction

Labour productivity also resumed growing in the second half of 2024. Productivity,
measured by real GDP per employed person, posted annual declines each quarter from 2023-Q1
to 2024-Q1. After stagnating in 2024-Q2, productivity grew in the last two quarters of last year,
by 0.3% in 2024-Q3 and by 0.8% in 2024-Q4. When measured by output per hour worked,
productivity already increased marginally in the first half of 2024 and accelerated during the last

41
 European Economic Forecast, Spring 2025

two quarters. Overall, labour productivity per person increased on average by 0.2% last year in the
EU but declined marginally in the euro area (-0.1%). There is a large dispersion across Member
States, with a rebound especially noticeable in the non-euro area Member States. Among the
largest EU Member States, further declines in labour productivity in 2024 were recorded in
Germany and Italy, while a rebound took place in France and Spain.
Wage growth decelerated further in 2024. Compensation per employee continued to grow
throughout last year but at slowing pace in both the EU and the euro area. Annual growth in
compensation per employee in the EU stood at 4.7% in 2024-Q4, down from 5.7% in 2024-Q1. In
the euro area it declined from 4.8% in 2024-Q1 to 4.1% in 2024-Q4. Annual growth in real
compensation per employee also slowed down, but to a lesser degree than the nominal values
thanks to further declines in inflation rates. Growth remained largely positive, at 2.1% in 2024-Q4
for the EU and 1.8% for the euro area. A comparison between the whole years 2024 and 2023
show a slowdown in nominal wage growth in the EU, from 6.0% in 2023 to 5.3% in 2024.
Conversely, real compensation per employee increased to 2.3% in 2024 from a decline of 0.6% in
2023 thanks to a significant decline in annual inflation between 2023 and 2024.
Differences in wage growth across Member Graph I.5.5: Compensation per employee and HICP
States were wide. For the whole year 2024, the inflation in 2024 across Member States

highest wage growth rates (in double digits) were 18 y-o-y % growth
recorded in Eastern EU countries such as 16
Romania, Poland, Hungary, Croatia and Bulgaria. 14
Despite higher-than-average inflation, these 12
countries still rank high in terms of real wage 10
growth rates. Among large Member States, the 8
Netherlands, Germany and Spain recorded higher
6
than average nominal wage growth (6.5%, 5.2%
4
and 5.0% respectively) while wages in France and
2
Italy grew more modestly, by 3.2% and 3.4%
0
respectively. In real terms, wage growth
HU
HR

AT

EL

EE

ES
NL

CZ
BG

DK
IE
IT
FR
RO

SK
SI

DE
SE
EA20
CY

BE
FI
PL

LT
LV

MT
EU27

LU
PT

differences in 2024 are also large, ranging from

Compensation per employee HICP inflation
declines (Ireland, Luxembourg and Finland) to
Eastern countries approaching 10% increases.
Going forward, surveys point to slowing recruitment and wage growth. The European
Commission Employment Expectations Indicator (EEI), which summarises managers’ employment
plans, declined marginally since last Autumn and until the latest print in April this year. The
employment index of the euro area composite PMI stabilized around the 50 mark (which separates
expansion from contraction) during the first quarter of this year, with little change to euro area
employment indicated at the start of the second quarter (Flash report for April).

42
 Economic outlook for EA and EU

This forecast projects a slowing but still Graph I.5.6: Employment growth and unemployment rate
broad-based employment expansion for this 3 forecast 12
y-o-y %
year and next. Employment growth in the EU is 11
2
expected to decline from an annual growth rate 10
of 0.8% in 2024 (1.0% in the euro area) to 0.5% 1
9
this year and next in both the EU and the euro 0 8
area (see Graph I.5.6) (9). Across countries, job 7
-1
losses are expected this year in a few countries 6
including Germany and France (-0.2% in both -2 5
countries). Conversely, strong employment growth -3 4
this year is set to continue in Spain (2.1%) and in
a few other countries such as Malta and Croatia.
Employment growth
In 2026, employment growth is projected to Unemployment rate (rhs)
converge somewhat with moderation in countries Unemployment rate forecast (rhs)

with strong employment growth this year and a

return to job creation in Germany (+0.2%) and France (+0.5%).
Labour productivity is set to rebound this Graph I.5.7: Job intensity of the economic growth and
year and to accelerate in 2026, while the labour productivity

job-intensity of growth normalises further. 6 y-o-y % change, y-o-y % change 6

Since 2022, economic growth in the EU has been 4q ma change, 4q ma

exceptionally job-rich, with employment growth 4

forecast
4

even exceeding real GDP growth in 2023. While

2 2
job intensity (10) started to increase in 2022 and
peaked in 2024-Q1, labour productivity growth 0 0
moderated in 2022 and turned negative in 2023.
Last year, as job intensity of GDP growth started -2 -2

to decline, labour productivity recovered in the

-4 -4
second half of the year but remained overall
weak in 2024 (see Graph I.5.7). Job intensity is -6 -6
set to normalize this year and next while labour 16-Q1 17-Q3 19-Q1 20-Q3 22-Q1 23-Q3 25-Q1 26-Q3

productivity per employed person is projected to Job intensity Productivity (rhs)

increase further this year, averaging 0.6% growth

in the EU (0.4% in the euro area), before gaining strength in 2026 with 1% growth (0.8% in the
euro area). Real unit labour costs are also expected to abate thanks to productivity gains and
moderation in real compensation per employee. After a strong increase last year (1.7% in both the
EU and the euro area), real unit labour costs are expected to increase by only 0.5% this year (0.6%
in the euro area) and to decline marginally in 2026 (-0.1% in both the EU and the euro area).

(9)
After the cut-off date of this publication, Eurostat published on 15 May the flash estimate on GDP and employment for
the first quarter. Employment growth for 2025-Q1 came in at 0.2% for the EU and 0.3% for the euro area, above our
projections. This introduces an upside risk to the employment growth and a downside risk to productivity growth.
(10)
Job intensity is defined as the ratio of employment growth to economic activity growth and captures the extent to
which economic growth is converted into employment growth.

43
 European Economic Forecast, Spring 2025

The unemployment rate is expected to Graph I.5.8: Unemployment rates across Member States,
stabilise this year and hit a new record low 2024 compared to 2019 and 2026

in 2026. Even as employment growth is

18
projected to slow down in the EU, it is set to %

outpace the increase of the active population. As 16

such, the EU unemployment rate is projected to 14

decline further this year and next and reach new 12

record lows. The EU unemployment rate is 10

expected at 5.9% this year and 5.7% in 2026 8
(6.3% and 6.1% respectively in the euro area). 6
Member States with the highest unemployment
4
rate, such as Spain and Greece, are expected to
2
continue recording the strongest declines this
year and next, hence contributing to the 0

AT
HU

EE

EL
ES
CZ

CY
HR
NL

IE
BG

SK
RO

IT

FI
FR
PL

DE
SI

BE
LU
DK

LV

SE
MT

EU27

PT
EA20

LT
narrowing of cross-country dispersion (see
Graph I.5.8). 2024 2019 2026

Wage growth is set to moderate further over the forecast horizon. Latest indicators such
as the ECB wage tracker continue to indicate that negotiated wage pressures are easing this year.
Furthermore, inflation expectations are also trending lower this year and in 2026. As such, growth
of nominal compensation per employee in the EU is expected to moderate further from 5.3% in
2024 to 3.9% this year and 3.0% in 2026. For the euro area, nominal compensation per employee
would decline from 4.5% last year to 3.4% this year and 2.7% in 2026. Real compensation is also
set to moderate but remain above productivity growth. This year, real wages at EU and euro area
level are set to recover all the purchasing power lost since the surge of inflation and start
expanding again in 2026. However, the recovery in real wages displays large cross-country
disparities. By 2026, average real wages in six Member States (Estonia, Finland, Ireland,
Luxembourg, Sweden and Slovakia) are still set to be below their post pandemic peak of 2021 or
2022.

Table I.5.1: Labour market outlook - euro area and EU

(Annual percentage change) Euro area EU

Autumn 2024 Autumn 2024

Spring 2025 Forecast Spring 2025 Forecast
Forecast Forecast
2023 2024 2025 2026 2024 2025 2026 2023 2024 2025 2026 2024 2025 2026
Population of working age (15-74) 0.6 0.4 0.3 0.2 0.4 0.3 0.2 0.5 0.3 0.2 0.1 0.3 0.2 0.1
Labour force 1.2 0.8 0.4 0.4 0.8 0.5 0.5 1.0 0.7 0.4 0.3 0.7 0.4 0.4
Employment 1.4 1.0 0.5 0.5 0.9 0.6 0.6 1.2 0.8 0.5 0.5 0.8 0.6 0.5
Employment (change in million) 2.4 1.6 0.9 0.9 1.6 1.1 1.0 2.5 1.7 1.0 1.1 1.7 1.2 1.1
Unemployment (levels in millions) 11.2 10.9 10.8 10.5 11.0 10.8 10.7 13.2 13.1 12.9 12.6 13.1 12.9 12.7
Unemployment rate (% of labour force) 6.6 6.4 6.3 6.1 6.5 6.3 6.3 6.1 5.9 5.9 5.7 6.1 5.9 5.9
Labour productivity, whole economy -1.0 -0.1 0.3 0.8 -0.2 0.6 1.0 -0.7 0.2 0.6 1.0 0.1 0.9 1.3
Employment rate (a) 64.4 64.8 64.9 65.1 64.8 65.0 65.3 64.1 64.4 64.6 64.8 64.4 64.7 64.9

(a) Employment as a percentage of population of working age. Definition according to structural indicators. See also note 6 in the Statistical Annex. For the EU and EA, this table now also displays
employment in persons, limiting the comparability to figures published before Spring 2023.

44
6. INFLATION

Energy has dominated the inflation Graph I.6.1: Inflation breakdown, euro area
dynamics since last autumn. After declining 12
y-o-y % change,
over the summer, annual headline inflation in the 10 pps.
euro area rose steadily from its three-and-a-half- 8
year-low of 1.7% in September to 2.5% in 6
January, to then moderate to 2.2% in March and
4
April (11). The increase between September and
2
January was driven primarily by the energy
0
component, which rose by 8 pps. over the same
-2
period, progressively turning from a Jan-21 Jan-22 Jan-23 Jan-24 Jan-25
disinflationary to inflationary factor. Energy Energy
Unprocessed food
turned disinflationary again as from February Non-energy industrial goods
(see Graph I.6.2.b), reflecting a sharp decline in Processed food incl alcohol &tobacco
Services
energy commodity prices, which culminated with HICP, y-o-y % change
a contraction of 2.3% m-o-m, in April - the
largest monthly decline since end-2022 (see Graph I.6.2.a). Similar trends were observed in most
Member States.
Graph I.6.2: Energy commodity prices and inflation in the euro area

a. Price level (2019=100) b. Annual energy inflation and contributions

200 Index, 2000 45 %, pps.
2019=100 40
180 35
1500
30
160 25
1000 20
140 15
500 10
120
5
0
100 0
-5
-10
-15
Energy
Fuels and lubricants for personal transport equipment
Electricity, gas and other fuels Contributions from electricity, gas and other fuels
Brent Contributions from fuels for transport
TTF, rhs Energy

After moderating in late 2024, food inflation rebounded as of February 2025, fuelled by
strong momentum in unprocessed food. Following a temporary increase in autumn 2024, food
inflation in the euro area moderated to 2.3% in January 2025, back to the 3-year-low registered
over the summer months, only to rise gradually thereafter to 3% in April. This increase reflects
rising pressures in unprocessed food, with annual inflation rising by 3.5 pps. in the first 4 months
of the year, to 4.9% in April (see Graph I.6.3.b). The price momentum in this component firmed
rapidly as pipeline pressures rebounded in food commodity markets (e.g. fruit and vegetables),
amid rising agricultural commodity prices (see Section 2), persistent wage pressures and the pass-
through from earlier energy price increases. Inflation of processed foods, on the rise in the fourth
quarter, fell back 0.4 pps. from December to 2.5% y-o-y in April, still somewhat above historical
averages (1).

(11)
According to the flash estimate for the euro area published after the cut-off date of the forecast

45
 European Economic Forecast, Spring 2025

Graph I.6.3: Inflationary pressures, euro area

a. Processed food b. Unprocessed food

20 % 25 % % 50
18
20 40
16
14 15 30
12 10 20
10
5 10
8
6 0 0
4
-5 -10
2
0 -10 -20
Apr-22 Oct-22 Apr-23 Oct-23 Apr-24 Oct-24 Apr-25 Apr-22 Oct-22 Apr-23 Oct-23 Apr-24 Oct-24 Apr-25

y-o-y 3m-o-3m* m-o-m* y-o-y 3m-o-3m* m-o-m*, rhs

Note: * seasonally and working-day adjusted, annualised Note: * seasonally and working-day adjusted, annualised

c. Services d. Energy
12 % 80 % % 400
70
10 60 300
50
8
40 200
6 30
20 100
4 10
0 0
2
-10
0 -20 -100
-30
-2 -40 -200
Apr-22 Oct-22 Apr-23 Oct-23 Apr-24 Oct-24 Apr-25 Apr-21 Oct-21 Apr-22 Oct-22 Apr-23 Oct-23 Apr-24

y-o-y 3m-o-3m* m-o-m* y-o-y 3m-o-3m* m-o-m*, rhs

Note: * seasonally and working-day adjusted, annualised Note: * seasonally and working-day adjusted, annualised

Price pressures in services lost impetus over autumn and but firmed again in early
2025. The gradual easing of momentum in services prices over most of 2024 (see Graph I.6.3.c)
was fully offset by positive base effects, resulting in an annual services inflation persisting at
around 4%. The price momentum picked up again as from January 2025 but was more than offset
by base effects turning negative in the first quarter, leading to a moderation of services inflation
to 3.5% in March. A very strong m-o-m rise in services prices in April, however, pushed the annual
inflation rate to 3.9%. Even net of the Easter (12) calendar effect, the increase in services price
pressures in April remains remarkably strong as highlighted by the spike in the monthly price gain
adjusted for seasonal and calendar effects (see Graph I.6.3.c). Looking at individual services
categories (see Graph I.6.4a), inflation in communication remained relatively weak, while inflation
in other categories continued to exceed historical patterns. Inflation of package holidays and
accommodation plunged, likely temporarily, in March, following high readings since 2021 (see
Graph I.6.4.a). Overall, the gradual convergence of inflation in services with different degrees of
exposure to the successive pandemic, energy and wage shocks suggests that the legacy effect of
these shocks is fading (see Graph I.6.4.b).

(12)
The timing of Easter (March in 2024 but in April of 2025) likely resulted in a shift in the seasonal increase in package
holiday prices with the ensuing strong negative impulse for annual inflation in March 2025 and a positive one in April
2025.

46
 Economic outlook for EA and EU

Graph I.6.4: Services inflation, euro area

a. Inflation of individual service categories (COICOP b. Inflation of services grouped by sensitivity to

groupings), deviations from 2002-2019 average wages and energy or the need for personal contact
14 9 y-o-y %
12 change
8
10
7
8
6
6
5
4
4
2
3
0
2
-2
Mar-22 Sep-22 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 1
Communication Apr-22 Oct-22 Apr-23 Oct-23 Apr-24 Oct-24 Apr-25
Housing Total Contact-intensive
Package holidays and accommodation
Non-contact-intensive Energy-sensitive
Recreation and personal care, excl. package holidays and accommodation
Transport Non-energy-sensitive Wage-sensitive
Miscellaneous Non-wage-sensitive

Notes: Graph b: Contact-intensive sectors include Transport services (cp073), Recreational and cultural services (cp094), Package holidays
(cp096), Restaurants and hotels (cp11), Hairdressing salons and personal grooming establishments (cp1211). Energy- and wage- sensitive
components based on ECB (Fagandini et al, 2024, Decomposing HICPX inflation into energy-sensitive and wage-sensitive items, ECB
Economic Bulletin, Issue 3/2024).

Inflation in non-energy industrial goods Graph I.6.5: HICP excluding energy and food, and a range
remains around historical averages. It held for 20 alternative underlying inflation
indicators in the euro area
steady at 0.5-0.6% since August 2024 amid
deflationary pressures from imports, a 10
%
strengthening euro and subdued consumer
demand. Deflation on an annual basis continued 8

in durables but eased somewhat in recent

months, converging towards historical averages 6

(from -0.8% on average in 2024-Q3 to -0.2% in

4
2025-Q1). This was broadly offset by moderating
inflation in semi-durables (from 1% in 2024-Q3
2
to 0.4% in 2025-Q1), while inflation in non-
durables plateaued, at around 1.8% since mid- 0
2024. Apr-21 Apr-22 Apr-23 Apr-24 Apr-25

Inter-quartile range Range

Underlying price pressures edged down in
Median HICP excl. food and energy
February and March. HICP excluding food and
energy has been stable, at 2.7% since September, Notes: Median, interquartile range and range refer to a battery of
20 underlying inflation indicators: 10 trimmed means with trims
before edging down to 2.4% in March 2025, a ranging from 5 to 50%, weighted and unweighted median, 3
three-year low. It rebounded subsequently to standard exclusion-based measures (excl. energy, excl. energy and
unprocessed food and excl. energy and food), 2 ECB supercore
2.7% in April, driven by services. A range of 20 indicators and 3 ECB Persistent and Common Component of
alternative core inflation indicators point to Inflation Indicator.
moderation of underlying price pressures in the
first quarter of 2025. The median of all 20 indicators stabilised at around 2.5% since October
2024, but the range and inter-quartile range have narrowed to multi-year lows (see Graph 6.5). A
similar moderation in underlying price pressures is visible across most Member States, with the
exception of Bulgaria, Hungary and Slovakia experiencing a rebound in services inflation.
The sharp fall in oil and gas prices is set to reinvigorate the disinflationary impact of
energy. Following a strong correction of oil (Brent), gas (TTF) and wholesale electricity prices
magnified by appreciation of exchange rates across the EU, consumer energy prices are expected
to contract, on an annual basis for the rest of 2025 and the first half of 2026. Not only are
current commodity price assumptions sharply lower than in the autumn, but – based on futures
prices – they also trend down in the remainder of the forecast horizon, ensuring a steady
disinflationary impulse this and next year. This implies a significant change from the AF24 when
energy was expected to add to inflation in both years.

47
 European Economic Forecast, Spring 2025

Intensifying competitive pressures in manufactured goods are set to push industrial

goods inflation below historical averages. One of the fallouts from the ongoing trade war
between the US and China is the diversion of goods traded between the two countries towards
third markets, including the EU. Given the magnitude of these flows, this is set to markedly
increase competitive pressures in consumer goods markets across the EU and, together with the
appreciation of EU currencies, should push inflation in non-energy industrial goods down, close to
0% (euro area) and 0.5% (EU) later this year and keep it well below historical averages throughout
2026. This is around 0.5 pps. below levels expected in the Autumn Forecast in both the euro area
and EU in both years.
Services inflation is expected to moderate only gradually amid robust, albeit easing,
wage growth and persistent labour market tightness. The moderation in services inflation
that started in the first quarter is set to continue over the forecast horizon, albeit only gradually,
and amid some volatility around the downward trend (as evidenced by the April uptick). The firming
price momentum in early 2025 (see Graph I.6.3.c) and rising selling price expectations (see Graph
I.6.6.c) point to further persistence of annual inflation rates in the near term, as labour markets
remain tight and wage pressures appear somewhat stronger than anticipated in autumn. Still,
beyond the near term the momentum in services prices is set to weaken as wage growth cools in
an environment of subdued sentiment, negative output gaps and broadly neutral macroeconomic
policy mix. This would lead to a gradual moderation in services inflation over the forecast horizon
to levels around 2.5% (euro area) and 2.7% (EU) towards the end of 2026, still roughly 0.5 pps.
above historical averages.
Graph I.6.6: Selling price expectations, euro area
a) Food manufacturing and retail b) Industrial goods prices (HICP) and goods manufacturing c) Services (HICP)
and retail
20 3m-o-3m % change, sa balances, sa 80 8 3m-o-3m % change, sa balances, sa 60 10 3m-o-3m % change, sa balances, sa 40
35
50 8
15 60 6 30
40 6 25
10 40 4
20
30 4
15
5 20 2
20 2 10

0 0 0 5
10 0
0
-5 -20 -2 0 -2 -5
Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24
3m-o-3m price momentum 3m-o-3m price momentum 3m-o-3m price momentum
SPE in food retail (lagged 2 months) SPE in consumer goods manufacturing (lagged 2 months) SPE in services (lagged 4 months)
SPE in food manufacturing (lagged 4 months) SPE in consumer goods retail (lagged 2 months)

Food inflation is set to remain high in the near term reflecting recent increases in
agricultural commodity prices and still elevated labour cost pressures. Agricultural
commodity prices have risen markedly since the autumn and futures contracts suggest prices
significantly above those assumed in the autumn this and next year. The resulting acceleration in
momentum of unprocessed food prices is set to keep annual total food inflation elevated in the
near term. This outlook is confirmed by the increase in the Commission’s Business and Consumer
Survey’s selling price expectations of food manufacturers, and especially in food retail (see Graph
I.6.6.a). Food inflation is then set to decline over the course of 2026, in line with receding pipeline
pressures from agricultural commodities and labour cost, to settle around its longer-term average
for the year as a whole (2.1% in the euro area and 2.5% in EU). All in all, food inflation is revised
up strongly by around ¾ pps. in 2025 around ⅓ pps. in 2026 in both the euro area and EU.

48
 Economic outlook for EA and EU

Summing up, HICP inflation is set for a Graph I.6.7: Inflation breakdown, EU
gradual decline in 2025 and 2026 at a pps.,
11
somewhat faster pace compared to the 10 y-o-y %
change forecast
autumn. The current assessment of the impact 9
8
of trade tensions incorporated in the baseline 7
scenario (13) on EU inflation is clearly negative, 6
with key channels related to the (i) correction of 5
4
energy commodity prices, (ii) competitive 3
pressures from diversion of Chinese goods away 2
from the US market and (iii) appreciation of the 1
0
euro and other EU currencies. These downward -1
pressures outweigh (i) higher-than-previously- 21 22 23 24 25 26
Energy
expected food inflation and (ii) stronger pressures
Food
in services amid slightly higher wage growth and HICP excl. energy, food and tobacco
tighter labour market compared to the autumn. HICP, all items (y-o-y % change)

All in all, the outlook is now for a somewhat

faster moderation in core and headline inflation in the forecast horizon. In the EU, headline
inflation is projected to decline from 2.6% in 2024 to 2.3% in 2025 and 1.9% in 2026. This is
0.1 pps. and 0.2 pps. below the Autumn Forecast in 2025 and 2026, respectively, in both the EU
and euro area. The deceleration in 2025 will be largely concentrated over the next 3 quarters,
implying that the euro area inflation will reach the 2% ECB target already by mid-25. Inflation is
then expected to move broadly sideways in both EU and euro area in 2026. Core inflation in the EU
(excl. food and energy) is set to moderate from 3.1% in 2024 to 2.5% in 2025 (unchanged from
the autumn) and 2.0% in 2026 (-0.1 pps. compared to autumn). In the euro area it is projected to
decline from 3.1% in 2024 to 2.5% in 2025 (-0.1 pps. from autumn) and 2026 in 2026 (-0.2 pps.
from autumn). This downward to the inflation outlook is corroborated by the decline in the market-
based inflation expectations to multi-year-lows (see Graph I.3.5)
Growth in the EU GDP deflator continued to Graph I.6.8: Decomposition of the annual growth in GDP
slow in 2024, supported by the cyclical deflator, EU

rebound in productivity. Growth in the EU GDP 8 % change,

pps.
deflator fell to 2.9% in 2024-Q4, the lowest since
6 Forecast
mid-2021 (see Graph I.6.8). The contribution from
unit profits to the GDP deflator remained 4
negative in the first two quarters of 2024 – partly
offsetting its strong contribution in previous 2
quarters - and narrowed sharply in the third and
fourth (to 0.0 pp.). This suggests that the 0
“correction” phase which followed the prior profit
build-up may be coming to an end. Recovering -2
profit margins are offset by a lower contribution
from decelerating wages and a rebound in Unit tax
Productivity
Unit profit
GDP deflator
Cost per worker

productivity, which started subtracting from the

deflator for the first time in two years. These trends – continued recovery in profits and
productivity and moderation in wage growth – are set to continue in the forecast horizon. Together
with a shrinking contribution from taxes, they should ensure the deceleration in the GDP deflator
from 3.3% in 2024 to 2.8% in 2025 and 2.2% in 2026, the lowest since 2020.
Dispersion of inflation within the EU is set to continue narrowing, albeit important
differences in inflation levels and trends at Member-State-level persist. Intra-EU
dispersion of inflation rates fell considerably in 2024 and the first quarter of 2025, largely on the
back of the waning energy and food price shocks that have had very different impacts on
respective domestic consumer price developments (see Graph I.6.9). While the range of inflation
(13)
with the notable absence of retaliatory measures from the EU

49
 European Economic Forecast, Spring 2025

forecasts across the EU should continue narrowing over 2025 and 2026, a strong geographical
pattern remains, with Member States from central and eastern Europe set to have visibly higher
core inflation, linked primarily to domestic unit labour cost (see Graph I.6.10). Moreover, in 2025,
headline inflation is set to increase from 2024 in e.g. Slovakia, Bulgaria, Hungary and Lithuania,
reflecting important hikes in VAT and excise taxes, and in Sweden on the back of an increase in
pressures in food and energy. In 2026 headline inflation is projected to moderate in all Member
States except for France, where it is set to rebound from below 1% in 2025 (dragged by the
largest deflation in energy prices in EU). Except for a pick-up in Slovakia and Bulgaria in 2025, core
inflation (excl. energy and food) is projected to moderate in all Member States in 2025 and then
further in 2026.
Graph I.6.9: Range of annual HICP inflation rates in EU Graph I.6.10: Cumulative HICP excl energy and food
Member States inflation and wage growth 2025-2026

30 40
y-o-y % change
forecast RO

Cumulative wage growth (per employee)

25 35
HU
20
30
BG HR
15
25 LT PL
10
20 CZ LV
5 PT
SI
NL AT SK
0
15 MT EL EE
DK SE EU27
EA20
-5 10 IE LU ES CY DE
IT
15-Q1 17-Q1 19-Q1 21-Q1 23-Q1 25-Q1
FR BE
5 FI
Range Interquartile range EA20 EU27
2 4 6 8 10
Cumulative HICP excl energy, food growth

Table I.6.1: Inflation outlook - euro area and EU

(Annual percentage change) Euro area EU
Spring 2025 Autumn 2024 Spring 2025 Autumn 2024
Forecast Forecast Forecast Forecast
2023 2024 2025 2026 2024 2025 2026 2023 2024 2025 2026 2024 2025 2026
Private consumption deflator 6.3 2.5 1.9 1.7 2.5 2.2 2.1 6.6 2.7 2.1 1.9 2.6 2.3 2.2
GDP deflator 6.0 2.9 2.5 2.0 2.9 2.2 2.0 6.1 3.1 2.7 2.2 3.1 2.4 2.1
HICP 5.4 2.4 2.1 1.7 2.4 2.1 1.9 6.4 2.6 2.3 1.9 2.6 2.4 2.0
HICP-overall excluding energy 6.3 2.9 2.4 1.9 2.9 2.3 2.0 7.2 3.1 2.7 2.1 3.1 2.6 2.2
HICP-overall excl. energy and unproc. food 6.2 2.9 2.4 2.0 2.9 2.4 2.0 7.0 3.2 2.6 2.1 3.2 2.6 2.2
HICP-overall excl. energy, food, alcohol, tobacco 5.0 2.8 2.4 1.9 2.9 2.4 2.0 5.7 3.1 2.5 2.0 3.2 2.6 2.2
Compensation per employee 5.3 4.5 3.3 2.7 4.3 3.0 2.6 6.0 5.2 3.7 3.0 4.9 3.5 3.0
Unit labour costs 6.4 4.7 3.0 1.9 4.5 2.4 1.6 6.8 4.9 3.1 2.0 4.8 2.5 1.8
Import prices of goods -4.3 -2.1 -0.6 -0.1 -1.6 1.6 1.6 -4.0 -2.1 -0.7 0.1 -1.7 1.6 1.6

50
7. EXTERNAL TRANSACTIONS

Merchandise trade volumes declined in 2024, though the net balance increased
marginally as the contraction in imports volumes outpaced that of exports. Imports
contracted more than exports, as detailed in Section 4, so the trade balance in volume terms
increased in 2024. Trade statistics show a slightly different picture. Export volumes continued
declining much stronger than import volumes in 2024, resulting in a lower net balance compared
to national accounts. The methodological difference between trade statistics and national accounts
is explained in detail in Box I.7.1.
Graph I.7.1: Merchandise balance, volume and terms of Graph I.7.2: Merchandise balance
trade effects
6
% of GDP
7 % GDP
6
4
5
4
3 2
2
1 0
0
-1
-2 -2
-3
-4 -4
-5
15 16 17 18 19 20 21 22 23 24
-6
Terms of trade effect 19-Q1 20-Q1 21-Q1 22-Q1 23-Q1 24-Q1
Change in volumes of import of goods Goods excl energy Energy Total
Change in volumes of exports of goods
Trade balance t-1
Merchandise trade balance

Terms of trade normalised further as energy prices fell, further lifting the merchandise
trade balance. In addition to the volume effect, terms of trade continued improving following the
strong rebound in 2023. Particularly the further easing of energy prices helped import prices
decelerate more markedly compared to export prices, leading to the positive terms of trade effect
on the trade balance (see Graph I.7.1). The lower energy costs reduced the energy deficit to EUR
336 billion in 2024, from EUR 433 billion in 2023. This contributed to a boost in the overall
merchandise balance, which averaged 2.6% of GDP in 2024, despite a dip in the last two quarters
(see Graph I.7.2).
The services trade surplus reached a new Graph I.7.3: Services balance by sector (BOP), EU
record high in 2024, supported by higher 2 % of GDP
export volumes and further improvement in 1.5
terms of trade. Services export volumes rose 1
more markedly than the previous year, while 0.5
growth in import volumes slowed somewhat, 0
pushing the services balance up. Besides the -0.5
volume effect, terms of trade improved -1
marginally as export prices accelerated faster
-1.5
than import prices. Although the terms of trade 2019 2020 2021 2022 2023 2024
Telecommunication and information
effect was less pronounced than for goods, it Intellectual property use
nonetheless contributed positively to the overall Travel
Transport
surplus, reinforcing the upturn of the services Manufacturing services
trade balance. Other
Total

Based on balance of payments (BoP) data,

travel and telecommunication were the main drivers of exports of services growth,
outpacing growth of imports of intellectual property. The tourism sector rebounded and the
travel balance exceeded 2019-levels for the second consecutive year in 2024, while the overall

51
 European Economic Forecast, Spring 2025

transport balance was still below. Besides, the dynamic increase of the ICT services, that was
already pointed to in Section 4, pushed up the overall services balance. In contrast, intellectual
property continued to drag down the balance due to the high import share (see Graph I.7.3).
Overall, the trade balance increased to 4.4 % of GDP in 2024 and the current account to
3.2 % of GDP (14), with large differences in contributions by Member States. After
rebounding in 2023, the aggregate trade balance continued to expand as both the merchandise
and services balance strengthened in 2024. The current account balance picked up too, supported
by the increased trade surplus, albeit slightly dampened by a higher deficit of net primary income
and current transfers. Member States, however, still diverge largely in their current account ratio to
GDP. Amongst large Member States, Ireland, the Netherlands and Germany continued recording
current account surpluses, while France is amongst the countries with current account deficits.
Looking forward, the trade balance is set to Graph I.7.4: Current account balance, EU
remain broadly stable as the drag of trade 5
% of GDP forecast
tensions is partially offset by further gains
4
in terms of trade. Exports of goods are set to
3
keep contracting in 2025 before rebounding in
2026, while imports of goods are expected to pick 2

up already in 2025 and to continue accelerating 1

in 2026. Services trade is set to slow slightly, 0

particularly services exports are projected to -1
decelerate more markedly in 2025, growing less -2
than services imports. In 2026, services exports 18 19 20 21 22 23 24 25 26

are expected to accelerate again while imports of Balance of services

Balance of goods
services are set to slow somewhat. Terms of Net primary income and current transfers
trade of goods are projected to improve further in Current-account balance

2025, as the prices of exported goods are

expected to rise while prices of imported goods are set to continue falling, albeit at a slower pace
compared to 2024. As a result, the merchandise and services trade balances are projected to
remain broadly stable over the forecast horizon (see Graph I.7.4).
The current account is set to decline over the forecast horizon compared to 2024, and
dispersion across countries to narrow. In both forecast years, the current account balance is
projected to be slightly lower than in 2024, at 3% of GDP in both years (see Graph I.7.4). The
current account balance is thus set to remain below pre-2019 levels, like the merchandise balance,
while the services balance is expected to remain well above. Dispersion across Member States is
projected to reduce over the forecast horizon, with the current account balance declining for most
Member States until 2026.

Table I.7.1: External position – euro area and EU

Euro area EU
Spring 2025 Autumn 2024 Spring 2025 Autumn 2024
Forecast Forecast Forecast Forecast
2023 2024 2025 2026 2024 2025 2026 2023 2024 2025 2026 2024 2025 2026
Merchandise trade balance (a) 2.2 2.7 2.7 2.7 2.9 2.9 2.8 2.1 2.6 2.6 2.6 2.7 2.6 2.6

Services trade balance (a) 1.4 1.7 1.6 1.7 1.8 1.7 1.8 1.6 1.8 1.8 1.8 1.9 1.8 1.9

Primary income balance (a) 0.0 -0.1 -0.2 -0.3 0.1 0.1 0.0 -0.1 -0.2 -0.3 -0.4 0.0 -0.1 -0.1

Secondary income balance (a) -1.1 -1.1 -1.1 -1.1 -1.0 -1.1 -1.1 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0

Current-account balance (a) 2.6 3.3 3.0 3.0 3.8 3.6 3.6 2.6 3.2 3.0 3.0 3.6 3.4 3.3

Net lending or net borrowing (a) 2.6 3.1 2.9 3.0 3.5 3.5 3.5 2.7 3.1 3.0 3.1 3.5 3.4 3.4

Terms of trade (b) 4.4 1.6 1.6 0.8 1.4 0.0 -0.1 3.9 1.3 1.6 0.7 1.2 0.1 -0.1
(a) % of GDP, (b) annual percentage change.

(14)
Based on National Accounts.

52
 Economic outlook for EA and EU

Box I.7.1: What do different data sources reveal about the EU’s export performance?

Different trade data reveal diverging trends for EU goods exports and trade performance.
According to international trade in goods statistics, EU export volumes were nearly 8% lower in 2024
compared to 2019 (see Graph 1b), and the EU lost nearly 15% of its market share in the world,
underscoring a long-term downward trend (see Graph 1c). Instead, national accounts data indicate an
8% increase of goods export volumes over the same period, resulting in an only 3% decrease of market
share since 2019, following a decade of stability. These figures include both extra- and intra-EU trade
for comparability, because national accounts only report total exports for the EU27 aggregate.

Graph 1: The evolution of EU goods exports

a. Goods' export at current prices b. Goods' export volume c. Goods' export market share
7 EUR tn 110 2019=100 115 2019=100
105
110
6 100
105
95
5 90 100
85
95
4 80
90
75
3 70 85
10 12 14 16 18 20 22 24 10 12 14 16 18 20 22 24 10 12 14 16 18 20 22 24
ITGS National accounts ITGS National accounts ITGS National accounts

Sources: Eurostat, WTO (world trade based on ITGS), European Commission (world trade based on national accounts).

International trade in goods statistics (ITGS) and national accounts diverge due to
methodological differences in how trade is defined and measured. (1) ITGS records goods
crossing borders, while national accounts focus on ownership changes. For instance, ITGS excludes
merchanting (goods bought from and resold to non-residents without the good actually crossing the
territory of the merchant), while national accounts record merchanting as exports on a net basis (i.e.,
revenue less the purchase value of goods sold). (2) Additionally, ITGS does not record any transactions
when a resident company buys inputs within a foreign territory, hires a foreign company to process
them on its behalf, and sells the finished goods abroad (contract manufacturing). In contrast, national
accounts record these transactions as imports (acquisition of inputs) and exports (sales of outputs) of
goods, while also booking the value of processing as an import of manufacturing services. (3) National
accounts also include in goods trade transactions such as products purchased by tourists, low-value
trade and illegal trade activities, which ITGS misses as it is traditionally based on customs
declarations. (4) Valuation methods differ as well: ITGS record exports ‘free on board’ (FOB) and imports
including ‘cost, insurance and freight’ (CIF), while national accounts record both exports and imports
on a FOB basis. These methodological differences result in a steady gap between the two statistics:

(1)
The methodology of ITGS is described in Eurostat (2020): User guide on European statistics on international
trade in goods, 2020 edition. Luxembourg: Publications Office of the European Union (link).
(2)
Merchanting trade occurs when for example a German company buys consumer electronics from a Chinese
manufacturer and sells them directly to a retailer in Brazil without the goods ever entering Germany. German
customs authorities would not register either the import or the export, but the national accounts would record
the net export value (broadly corresponding to the sales margin of the German company on this transaction).
(3)
Contract manufacturing occurs when for example an Irish pharmaceutical firm develops and owns the patent
for a medication and decides to produce it cost-effectively, by purchasing raw materials in China and
contracting a manufacturer in India. The Indian plant manufactures the product on behalf of the Irish company
without taking ownership of it. Once produced, the drugs are shipped from India to the US, where they are sold
to US distributors. In this case the goods never enter Ireland (thus no impact on trade in ITGS), but the Irish
national accounts record an export of goods (to the US), an import of goods (of raw materials from China) and
a service import (from India, for the value of the processing services). See also: Contract Manufacturing - CSO
- Central Statistics Office
(4)
Due to the lack of customs controls within the EU, intra-EU trade is measured through a monthly survey among
operators, complemented by other data such as VAT declarations. Low-value (de minimis) trade refers to
transactions below the minimum threshold required for customs declarations. Currently, imports from third
countries to the EU below EUR 150 are not liable to customs duty, but a simplified customs declaration for
such consignments was introduced following amendments to customs legislation in 2019 and 2020. Illegal
trade can include smuggling or the underreporting of import values in customs declarations.

(Continued on the next page)

53
 European Economic Forecast, Spring 2025

Box (continued)

national accounts systematically record 7-9% less goods exports in the EU27 than the ITGS (see
Graph 1a). A common feature of the two datasets is that neither record tariffs levied by the importing
country in the value of imports. In national accounts, import tariffs are recorded as indirect taxes on
goods.

The two datasets also use different price indicators to compute trade volumes. The ITGS uses
unit values based on physical quantities (typically, the weight or the number of units), which do not
capture the effect of composition and quality changes. Therefore, if there are changes in the quality
of goods being traded, these will not necessarily be reflected in unit values. Conversely, an increase in
the unit value of car exports can reflect either a growing share of luxury cars within exports
(composition), or improvements in comfort and safety features, performance or range (quality).
Comparisons of unit value indices and price indices show that the two methods can give significantly
different results. (5) For this reason, national accounts prefer price indices (ideally adjusted for quality)
to account for composition and quality effects and generally do not accept the use of unit values
(except for sufficiently homogenous goods).

Export unit values could be biased upward by composition and quality changes, which could
explain why the ITGS reports lower export volumes than national accounts. The national
accounts-based export price index of the EU systematically increases less than the ITGS-based export
unit value, suggesting a steady shift towards higher-value and higher-quality products within exports
(see Graph 2b). Furthermore, this gap between the growth rates of export prices and unit values is
systematically larger in the EU than on average in the world economy, which might suggest that the
EU experienced more export quality improvement and/or a stronger shift towards high-value products
than the rest of the world. This might reflect the relatively strong integration of EU countries in global
value chains (ECB, 2019) which facilitates their specialisation in activities with high skill content
(Timmer et al., 2014). (6)

Graph 2: Selected trade variables: ratios of national accounts to International Trade in Goods Statistics
a. Trade at current prices b. Deflator c. Trade volume
1.3 2019=1 1.3 2019=1 1.3 2019=1

1.2 1.2 1.2

1.1 1.1 1.1

1 1 1

0.9 0.9 0.9

0.8 0.8 0.8

10 12 14 16 18 20 22 24 10 12 14 16 18 20 22 24 10 12 14 16 18 20 22 24

EU export World trade EU export World trade EU export World trade

Notes: The graph shows each variable in national accounts divided by its counterpart in the ITGS, taking 2019 as base year. Each
panel has the same scale for comparability purposes.
Sources: Eurostat, WTO (world trade based on ITGS), European Commission (world trade based on national accounts).

These observations have implications for the use of trade data. National accounts better gauge
the contribution of exports to GDP growth and aggregate trade performance, as they account for
changes in export quality and composition. They also include exports of goods that are produced by
resident companies outside national borders. The ITGS, due to their monthly availability, remain a
useful source for the timely monitoring of trade flows, mainly at current prices. They can also be used
to analyse trade by product and partner, as these breakdowns are not available in national accounts,
keeping in mind the different coverage of ITGS data and the potential biases of the volume measures
calculated with unit values.

(5)
See: Eurostat (2016): Handbook on prices and volume measures in national accounts. Luxembourg: Publications
Office of the European Union (link), section 3.9.2
(6)
ECB (2019): The impact of global value chains on the euro area economy. ECB Occasional Paper Series 221
(link). Timmer, M.P., Erumban, A.A., Los, B., Stehrer, R., de Vries, G.J. (2014). Slicing Up Global Value Chains.
Journal of Economic Perspectives 28: 99-118. As a caveat, the same data patterns could also arise if the
national accounts of non-EU countries relied more strongly on unit values to compute trade deflators.

54
8. PUBLIC FINANCES AND THE FISCAL POLICY STANCE

The EU general government deficit fell Graph I.8.1: Drivers of the change in general government
slightly in 2024. After the small rise recorded in balance, EU

2023, the EU general government deficit declined 1.0 pps. of GDP

again in 2024, reaching 3.2% of GDP (3.1% of forecast

GDP in the euro area). The 0.3 pps. reduction was 0.5

primarily due to large revenue windfalls (15),

0.0
whereas subdued economic activity alongside
rising interest expenditure continued to weigh on -0.5

the deficit (see Graph I.8.1).

-1.0
Eleven Member States reported a deficit
higher than 3% of GDP in 2024. The number -1.5 2023 2024 2025 2026
of Member States with a general government Fiscal stance (national budgets) Revenue windfalls/shortfalls

deficit exceeding 3% of GDP is expected to Ch. COVID-19 and one-offs measures Ch. interest expenditure
Ch. cyclical component of the budget Change of budget balance
stabilise at eleven in 2025 and to decline to nine
in 2026, based on unchanged policies (see Graph
I.8.2). Eight EU countries are currently under an excessive deficit procedure. (16)
The EU deficit is set to rise marginally in both 2025 and 2026 (see Graph I.8.1). It is
projected to increase by more than 0.1 pps. in 2025 and only marginally in 2026, reaching 3.4% of
GDP (3.3% in the euro area). Discretionary fiscal policy is set to provide a deficit-reducing
contribution in 2025, whereas increasing interest expenditure and revenue shortfalls are projected
to exert upward pressure on the deficit in both years.
Graph I.8.2: General government balance developments across Member States

6
5 % of GDP
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
HU

EE
AT

EL
HR
ES

CY
EU27
RO

FR

FI

IT

NL

CZ

IE
BE
SK

LV

DE
MT
BG

LT

SI
SE

LU

DK
PL

PT

EA20

2026 2024 2025

Notes: Member States are ordered according to the projected 2026 general government balance.

Revenue- and expenditure-to-GDP ratios are both expected to increase over the
forecast horizon (see Graph I.8.3). The 0.5 pps. increase of the revenue ratio in 2024 was driven
by significant revenue windfalls, which offset large shortfalls recorded in 2023, mainly reflecting
the lagged impact of high inflation on certain tax bases, notably wages. (17) The expenditure-to-GDP
(15)
Revenue windfalls (shortfalls) are increases (decreases) in the revenue-to-GDP ratio that are not explained by
discretionary measures or transfers from the EU budget.
(16)
Excessive deficit procedures - overview - European Commission
(17)
Higher withholding taxes on financial assets’ income also supported tax collection in 2024.

55
 European Economic Forecast, Spring 2025

ratio also rose in 2024, by 0.2 pps., driven by higher interest expenditure. In 2025, despite some
shortfalls, the revenue-to-GDP ratio is forecast to increase by a further 0.3 pps., mainly supported
by discretionary measures to sustain social contributions and indirect taxes, as well as by higher
transfers from the EU budget. Simultaneously, the expenditure-to-GDP ratio is set to rise by 0.4
pps. due to further increases in interest expenditure and higher investment financed by both
national and EU budgets. Both the revenue and expenditure ratios are projected to increase
marginally in 2026, based on unchanged policies.
Graph I.8.3: Expenditure and revenue contributions to the Public investment is projected to further
change of general government balance, EU increase over the forecast horizon. The EU
0.75
pps. of GDP
public investment-to-GDP ratio increased to 3.6%
forecast in 2024, from 3.2% in 2019, and is projected to
0.50 rise further to 3.8% in 2025 and to stabilise in
0.25
2026. The increase between 2019 and 2026 is
expected to be supported by both the national
0.00 and the EU budgets. (18) In particular, the projected
increase in defence investment, around 0.3% of
-0.25
GDP between 2019 and 2026, drives the increase
-0.50
in investment financed by national budgets (see
Graph I.8.4). By the end of the forecast horizon,
-0.75 most EU countries are projected to spend more on
2023 2024 2025 2026
nationally financed public investment than they
Revenue Expenditure Change in budget balance did in 2019.

The EU debt-to-GDP ratio is expected to Graph I.8.4: Public investment in the EU

increase slightly over the forecast horizon
4.5 % of GDP
(see Graph I.8.5). After declining by 9 pps. forecast
4.0
between 2020 and 2023, the government debt-
3.5
to-GDP ratio for the EU aggregate stabilised in
3.0
2024, at around 82% (89% in the euro area),
2.5
approximately 3 pps. above the 2019 pre-
2.0
pandemic ratio. A slight increase in the EU debt
ratio is projected in both 2025 and 2026, to 1.5

84.5% of GDP (91% in the euro area). This 1.0

increase is driven by a less favourable interest- 0.5

growth-rate differential, reflecting higher debt 0.0

2019 2024 2025 2026
servicing costs and lower nominal GDP growth, Other nationally-financed Defence
while the projected primary deficits continue to RRF grants and other EU funds
exert upward pressure on debt levels. Additionally,
the stock-flow adjustment is set to be debt-
increasing over the forecast period. (19)
Government debt developments vary substantially across EU countries. By the end of
2026, the debt-to-GDP ratio is projected to be lower than in 2020 for 16 Member States. The most
significant declines — exceeding 30 pps. — are observed in Greece, Cyprus, Portugal, and Croatia.
By the end of the forecast period, 14 Member States are projected to have debt ratios above 60%
of GDP. Among them, Belgium, Greece, Spain, France, and Italy are set to have debt-to-GDP ratios
exceeding 100% (see Graph I.8.6).

(18)
Differences in investment financed by the EU budget among Member States depend on the allocation of Recovery and
Resilience Facility grants and other EU funds, as well as the degree of absorption.
(19)
The stock-flow adjustment (SFA) explains the difference between the change in government debt and the government
deficit/surplus for a given period. Conceptually, the stock-flow adjustment can be broken down into the following
categories: net acquisition of financial assets, debt adjustment effects and statistical discrepancies. The debt-
increasing SFA projected in the EU is mainly driven by the developments in Italy, Spain and the Netherlands in both
2025 and 2026, and also Poland in 2026.

56
 Economic outlook for EA and EU

Graph I.8.5: Drivers of change in the debt-to-GDP ratio, EU Graph I.8.6: Debt developments across Member States

8 % GDP debt increasing 220

% of GDP
6 forecast 200

4 180
160
2
140
0 120
-2 100
80
-4
60
-6
40
debt decreasing
-8 20
2023 2024 2025 2026
0
Primary balance Stock-flow adjustment

EE

HU
AT
HR

ES

EL
NL
BG
CZ

CY
SE

IE
SK

FR
LU

LV
LT
DK
RO
MT

DE
FI

IT
SI

BE

EU27
PL

PT

EA20
GDP deflator effect Real GDP growth effect
Interest expenditure Change in the debt ratio 2020 2024 2026

The EU fiscal stance was slightly contractionary in 2024 and is set to be broadly neutral
in 2025. After an overall expansion of around 3% of GDP in 2020-23, the fiscal stance for the EU
aggregate was slightly contractionary in 2024, by around ½% of GDP (see Graph I.8.7). (20) This
slightly contractionary stance was driven by the decline in governments’ subsidies to private
investment (other capital expenditure; especially housing renovations in Italy) and lower
expenditure financed by EU funds, (21) only partly offset by increasing investment financed by
national budgets. A broadly neutral fiscal stance is projected for 2025 in the EU aggregate (and
the euro area), with some restraint in both net current expenditure (22) and other capital
expenditure, driven by the adjustment requirements of the new EU fiscal framework, partly offset
by further expanding investment nationally financed (mainly for defence) and expenditure financed
by RRF grants. In 2026, the no-policy-change forecast points to a neutral fiscal stance in the EU
(and in the euro area). The impact of activating the National Escape Clause of the Stability and
Growth Pact, providing flexibility over 2025-2028 for higher defence expenditure, is likely to
materialise from 2026 onwards. For the EU aggregate, this impact is expected to be broadly offset
by the additional consolidation measures needed to comply with the requirements of the EU fiscal
framework (see also Special Issue 3 “The economic impact of higher defence spending”).

(20)
The fiscal stance measures the short-term impulse to the economy from discretionary fiscal policy. See for more
details Cepparulo et al. (2024), An Assessment of the Euro Area Fiscal Stance, Economic Brief 080, European
Commission. The fiscal stance is considered broadly neutral at a value within the -0.25% / +0.25% of GDP range while
it is considered expansionary (-) or contractionary (+) outside this range.
(21)
Expenditure financed by EU funds was particularly high in 2023 due to the absorption of remaining funds from the
Multiannual Financial Framework (MFF) 2014-2020.
(22)
Current expenditure net of i) interest expenditure; ii) discretionary revenue measures; iii) current expenditure on
programmes of the Union fully matched by current revenue from Union funds; iv) cyclical elements of unemployment
benefit expenditure; and v) one-offs and other temporary measures. For further discussion and comparison of this
aggregate with the fiscal stance, see also See Box I.2.4 of the Commission Autumn 2024. For an overview of Member
States’ medium-term fiscal plans, see e.g. European Commission (2024). 2025 European Semester: bringing the new
economic governance framework to life. COM(2024) 705 final (link).

57
 European Economic Forecast, Spring 2025

Contractionary fiscal policies are expected Graph I.8.7: Fiscal stance and its components, EU
in eight Member States in 2025. Cross- 0.75 Contractionary/
country heterogeneity in fiscal policy is expected 0.25 Consolidation

to be pronounced in 2025, with fiscal stances -0.25

ranging from a contraction of 1.9% of GDP in -0.75
Malta to an expansion of 2.6% of GDP in
-1.25
Denmark (see Graph I.8.8). This dispersion can be forecast
attributed partly to the design of the new -1.75
economic governance framework, which -2.25 Expansionary/
differentiates fiscal adjustment requirements -2.75 Relaxation

based on countries’ fiscal challenges, and partly -3.25

2020-2023 2024 2025 2026
to the different fiscal impulse from expenditure Expenditure financed by RRF grants and EU funds
financed by RRF grants and other EU funds. Net Other nationally financed capital expenditure
Nationally financed investment
current expenditure, which includes the impact of Net nationally financed current expenditure
discretionary revenue measures, is projected to Fiscal stance

be the main driver of the overall fiscal stance in

the majority of Member States, with a significant contraction (more than 0.75% of GDP) projected
in Slovakia, Estonia, Romania, Finland, France, Austria and Italy. In most countries, nationally
financed investment and especially expenditure financed by RRF grants and other EU funds are
expected to provide high-quality fiscal support to the economy in 2025.
Graph I.8.8: Fiscal stance across Member States, 2025

3.0 % of GDP
2.5
Contractionary/ Consolidation
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5 Expansionary/Relaxation
-3.0
DK LT PT LU BG LV CY EL HR NL HU BE PL ES SI IE CZ SK IT DE FI SE FR EE AT RO MT EA EU
RRF grants and other EU funds contribution Other nationally financed capital expenditure contribution
Nationally financed investment contribution Net nationally financed current expenditure contribution
Fiscal stance

Table I.8.1: General government budgetary position - euro area and EU

(% of GDP) Euro area EU
Autumn 2024 Autumn 2024
Spring 2025 Forecast Spring 2025 Forecast
Forecast Forecast
2023 2024 2025 2026 2024 2025 2026 2023 2024 2025 2026 2024 2025 2026
Total revenue (1) 46.0 46.5 46.8 46.9 46.5 46.7 46.6 45.5 46.0 46.3 46.4 46.1 46.3 46.2
Total expenditure (2) 49.5 49.6 50.0 50.2 49.5 49.6 49.4 49.0 49.2 49.6 49.7 49.2 49.3 49.1

Actual balance (3) = (1)-(2) -3.5 -3.1 -3.2 -3.3 -3.0 -2.9 -2.8 -3.5 -3.2 -3.3 -3.4 -3.1 -3.0 -2.9
Interest expenditure (4) 1.7 1.9 2.0 2.1 1.9 2.0 2.1 1.7 1.9 2.0 2.1 1.9 2.0 2.0
Primary balance (5) = (3)+(4) -1.8 -1.2 -1.2 -1.1 -1.1 -0.9 -0.7 -1.7 -1.3 -1.3 -1.3 -1.2 -1.0 -0.9

Change in structural budget balance (a) 0.4 0.7 0.1 -0.2 0.8 0.2 -0.2 0.3 0.5 0.0 -0.2 0.6 0.2 -0.2
Overall fiscal stance (b) 0.1 0.5 0.2 0.0 0.5 0.3 0.1 0.1 0.4 0.2 0.0 0.4 0.2 0.1

- Fiscal stance - contribution from national net expenditure 0.2 0.3 0.4 0.0 0.5 0.4 0.1 0.1 0.1 0.3 0.0 0.3 0.4 0.0

- Fiscal stance - contribution from the EU -0.1 0.2 -0.2 -0.1 0.1 -0.1 0.0 -0.1 0.2 -0.2 -0.1 0.1 -0.1 0.0

Gross debt 88.9 88.9 89.9 91.0 89.1 89.6 90.0 82.1 82.2 83.2 84.5 82.4 83.0 83.4
(a) pps. of potential GDP. (b) The fiscal stance measures the short-term impulse to the economy from discretionary fiscal policy. A positiv e figure corresponds to a contractionary stance while a negativ e figure corresponds
to an expansionary stance.

58
9. RISKS

The risk assessment for this forecast is dominated by the uncertainty surrounding the
tariff configuration that will prevail over the forecast horizon. The set-up of US tariffs vis-
à-vis the EU and other partners that underpins this forecast (see Section 1) is a purely technical
assumption. The negotiations with trade partners that the US government intends to engage in
could yield very different outcomes. If the currently suspended high tariffs are reinstated, they
could significantly impact EU GDP, particularly through substantial confidence effects. The scale
and nature of this shock would largely depend on the policy responses from the EU and other
partners, as discussed in the Special Issues section, and would be commensurate to the high
importance of bilateral trade relations between the EU and the US, both directly and via global
value chains (see Box II.1.1). The trade agreement between the US and China reached on 12 May,
which reduced tariffs to 30% on Chinese imports into the US and 10% on US imports into China, is
a positive development that presents an upside risk to our growth forecast. However, the baseline
projections already factor in lower US tariffs than those seen at the forecast's cut-off date. Though
current rates are arguably even lower than assumed in the forecast, they remain relatively high
and are likely to significantly lead to a reduction of trade flows between the US and China.
Additionally, the agreement only temporarily suspends tariffs, leaving the door open for renewed
escalation. From the EU's viewpoint, the new trade deal between China and the US suggests that
negotiation outcomes may not necessarily be worse than those assumed. However, for the EU, the
scope for a relatively (i.e. in the sense of relative to other US trading partners) more favourable set
up than currently assumed appears more limited. Moreover, a continuously changing (trade) policy
environment could continue to restrain domestic demand. Overall, risks to the forecast are
perceived to be skewed towards the downside. Related risks to consumer inflation are both on the
upside – triggered by e.g. a rebound in commodity prices or possible EU retaliatory tariffs – and on
the downside – due to weaker demand pressures on services.
Episodes of financial stress could have lead to broader spillovers and have potentially
systemic impacts. Trade tensions could also lead to protracted financial volatility, especially if
retaliatory measures result in sharp corrections in asset values. While the market turbulence
observed during the week of 2–9 April remained contained, it underscored the risk of contagion
from non-bank financial institutions to the wider financial system. In a scenario where stress
spreads from leveraged intermediaries to the banking sector via asset fire sales, the impact on
credit availability and economic activity could be more severe than currently anticipated.
A more adverse global environment could strengthen the EU’s resolve to act
collectively and catalyse long-needed reforms. Ongoing trade tensions may prompt the EU to
accelerate trade negotiations with other key partners, thereby reinforcing its position as a reliable
trading partner. The political resolve to deepen the Single Market, particularly in services, digital,
and energy sectors, could be summoned in the face of external headwinds. Progress on the
Savings and Investment Union and a recalibration of regulatory burdens—where disproportionate
to their benefits—could boost productivity, support growth, and ease inflationary pressures in the
medium term. Narrowing the gap between abundant savings and insufficient investment could
also help reduce the EU’s elevated current account surplus, thus addressing concerns over global
imbalances.
Some recent initiatives aimed at boosting productive spending, not incorporated in this
forecast, could bolster economic activity. Germany’s planned increase in infrastructure and
defence spending could support economic activity, enhancing potential growth in Germany and in
the EU, albeit at the risk of higher inflation. Additional defence spending, leveraging flexibility
margins within the Stability and Growth Pact, might also provide a marginal boost to economic
activity, especially if investments are directed towards R&D, though as a secondary benefit to the
primary goal of enhanced security for the EU as a whole (Box I.4.1 and Special Issue 3).

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 European Economic Forecast, Spring 2025

A resurgence of inflation in the US could have global repercussions. Should US inflation

rise due to supply-side disruptions linked to tariffs, the Federal Reserve may be compelled to
pause or even reverse its loosening cycle. This would trigger a renewed tightening in global
financial conditions, with especially acute spillovers for emerging markets and open economies like
the EU.
Climate-related shocks remain a persistent and increasingly tangible source of
downside risk. Recent flooding in Valencia and wildfires in parts of North America, including the
Los Angeles area, illustrate once again how climate change can cause sudden and severe
disruptions to economic activity. While such events are difficult to predict in terms of timing and
location, their increasing frequency and intensity are indisputable. This underscores the urgency of
stepping up climate adaptation and mitigation efforts, as well as strengthening resilience—
particularly in regions and sectors most exposed to physical risks. Failure to act decisively could
amplify the macroeconomic and fiscal costs of future climate events.

60
PART II
Special Issues
1. THE MACROECONOMIC EFFECT OF US TARIFF HIKES
This Special Topic presents estimates of the effects of the US tariff announcements up to 2 April
2025, alongside hypothetical symmetric retaliations by the affected countries or trade blocks.
While highlighting the channels through which tariffs – taken in isolation - impact both the
economies of the imposing nation and the targeted economies, the analysis complements the
baseline projections presented in this publication. Results indicate that the imposition of tariffs
weakens the US economy, with moderate negative effects also on EU GDP. A general tit-for-tat
retaliation deepens the negative impacts in both the US and the EU. Beyond the direct effects of
tariffs, rising uncertainty and a loss of investor confidence in the US economy further aggravates
the adverse economic consequences by tightening financing conditions.
This Special Topic presents model simulations of three stylised scenarios related to the
sharp protectionist turn of US trade policy and potential countervailing measures. The
first scenario reflects US announcements up to and including 2 April 2025, featuring sizeable
unilateral tariff hikes on US imports of goods from virtually all trading partners. (23) As the long-
term outlook remains uncertain, the increase in tariffs is assumed to be highly persistent, though
not permanent. In a second scenario, the simulations add the effects of symmetric retaliations by
other countries, amid a stylised global tit-for-tat escalation. The sweeping US tariff
announcements, as well as the uncertainty regarding their application, triggered strong responses
in financial markets, with investors demanding higher risk premia on dollar-denominated financial
assets. (24) The third scenario therefore illustrates the impact of shifts in US risk premia, on top of
the pure unilateral tariff effects. Simulations are based on DG ECFIN’s QUEST model. (25)

Unilateral US tariff hikes

While higher tariffs shift US demand from imports towards domestically produced
goods, they also act as an adverse supply shock. Tariffs are a tax on imports that make
foreign goods more expensive for US households and firms. This induces some substitution away
from imports towards US-produced goods (expenditure switching channel), which boosts US
aggregate demand. (26) At the same time, tariffs erode the purchasing power of wages, which
lowers labour supply. (27) Moreover, through taxing imported intermediate inputs, tariffs raise
domestic production costs, acting as a further adverse supply shock.

(23)
The effective bilateral tariff rates used in our simulations are calculated based on the following set of assumptions: a
general increase of 25 percentage points (pps) on goods imported from Mexico and Canada, with only 10pp on oil
imports from Canada, and with USMCA-compliant imports (assumed to be 40% of total imports) being fully exempted;
54 pps on goods imports from China, 20 pps on goods from the EU, and 23 pps on average from the rest of the world.
These country-specific headline rates are fine-tuned by sectoral tariff hikes of 25 pps in the case of aluminium, steel
and automobile imports. For other sectors that are temporarily exempted (e.g. pharmaceuticals and semiconductors) we
assumed the country-specific headline rate would apply. Trade in services is taxed at 0%. As a result, the effective
tariff rate on total US imports (including services) goes up by around 20 pps.
(24)
See, e.g., Jiang et al. (2025) “Dollar Upheaval: This Time is Different”, mimeo (16 April 2025).
(25)
QUEST is a New Keynesian open economy dynamic stochastic general equilibrium (DSGE) model. The model framework
includes the main features relevant for understanding tariffs, such as imperfect substitutability of goods produced in
different regions, and sluggish adjustment of import volumes in response to relative price changes. Trade flows and
nominal exchange rates are modelled bilaterally, via integrated international goods and capital markets. The dynamic
model structure enables us to trace both short and long-run effects. The model distinguishes between a tradable and a
non-tradable sector. While it lacks the sectoral detail of typical trade Computable General Equilibrium (CGE) models and
therefore cannot assess impacts on specific manufacturing sectors and services, it includes trade in intermediate inputs
for both the tradable and non-tradable sectors. This captures linkages through cross-border value chains, which is
crucial as trade in intermediate inputs amplifies the effects of trade barriers. For these simulations, we use a 6-region
version of the model, including the EU, US, China, Canada, Mexico and the rest of the world (RoW), with trade linkages
calibrated based on the FIGARO database.
(26)
This demand-boosting effect of tariffs is partially weakened in our model by several channels: a) substitution between
imports and domestic goods is sluggish in the short run; b) with liquidity-constrained households, as tariffs erode the
purchasing power of incomes, this weakens demand not just for imports but also for domestically produced goods (real
income channel).
(27)
This reflects the substitution effect from lower real wages, reducing labour supply as leisure becomes relatively
cheaper. In the case of tariffs, the opposing income effect from lower real wages – which would typically increase
labour supply, as poorer households can afford less leisure – is offset for unconstrained households by an income
boost from higher expected net government transfers, funded by tariff revenues.

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 European Economic Forecast, Spring 2025

US terms-of-trade appreciation dampens the effect of tariffs on relative prices. Excess

demand for domestic products puts a strain on the economy’s resources, leading to a 5.6%
appreciation in the US terms-of-trade (ToT), (28) which is reflected partly in higher domestic
inflationary pressures, and partly in a stronger nominal exchange rate for the US dollar (induced by
monetary tightening in response to higher inflation). (29) The stronger ToT offsets roughly one third
of the direct effect of tariffs on relative prices, and acts as an equilibrating force to bring demand
for US goods back in line with supply capacities.
The US economy is hurt by the tariffs, as falling exports and weaker domestic demand
drive GDP 0.6-1.0% lower (top left panel of Graph II.1.1). A stronger real exchange rate, in
addition to limiting the shift away from imports, also makes US exporters less competitive abroad,
thereby crowding out exports (expenditure switching channel). In addition, higher real interest rates,
as monetary policy reacts to higher inflation, reduce domestic demand for investment and
consumption (intertemporal substitution channel). (30) At the same time, however, the terms-of-
trade gain from a stronger dollar provides some cushion for the fall in consumption demand, as it
raises the purchasing power of domestic incomes (real income channel).
Graph II.1.1: Unilateral US tariffs on imports

Notes: The panels on the left report real GDP in %-deviation from baseline, with the contribution of expenditure components to GDP. The
panels on the right show the respective trade balance-to-GDP ratios (in pp-deviation from baseline), showing contributions by volumes,
average price level change and terms-of-trade (relative price) changes. NX (ToT) refers to net exports (terms-of-trade).

Tariffs reduce US trade deficits only temporarily, by 1.3-1.5% of GDP. While tariffs shift
the composition of demand from imports towards US-produced goods, the resulting terms-of-
(28)
The terms-of-trade (ToT) is the ratio of export prices to import prices (at the border, expressed in the same currency),
capturing the relative price of domestically produced and foreign-produced goods. In other words, it shows how much a
country can import in exchange for its exports (with a higher ToT making a country richer), but also how expensive its
exporters are in world markets (with higher/stronger ToT hurting competitiveness). The ToT is a kind of real effective
exchange rate measure, and depends on nominal exchange rates as well as on domestic and foreign price levels. While
in the medium term, monetary policy has less control over the real exchange rate itself, it can influence to what extent
a given real appreciation pressure is reflected in stronger nominal exchange rates or relatively higher domestic
inflation.
(29)
To a smaller extent, weakened US import demand also puts downward pressure on the export prices of US trading
partners, which contributes somewhat to the US terms-of-trade appreciation.
(30)
As the tariff shock is assumed to be non-permanent, tariffs act as an intertemporal tax, encouraging the postponement
of consumption, and deepening the negative intertemporal substitution effects.

64
 Special Issues

trade appreciation crowds out exports, in order to bring demand for US goods back in line with
supply capacities. Therefore, the tariff hike reduces gross trade flows, lowering both imports and
exports. (31) That said, initially, import volumes decline more (by 6-11%) than export volumes (by 2-
6%), implying a positive contribution to the trade balance (see top right panel of Graph II.1.1). On
top of the volume component, the terms-of-trade gain raises the nominal trade balance further, as
it reduces the import bill and boosts export revenues through changes in relative prices. (32)
However, in the medium run, these effects fade as the fundamental drivers behind the US external
balance – saving relative to investment – are not significantly affected.
EU GDP would be lowered moderately, by around 0.2%, driven mainly by weaker exports
(bottom left panel of Graph II.1.1). The exports of the EU initially decrease by 1.1-1.5% (see Table
II.1.1). Since the US is one of the EU’s largest export markets, EU exports suffer from the shrinking
American market size, as US firms and households respond to tariffs by importing less overall,
including from Europe (see yellow bars in top left panel of Graph II.1.2). However, this effect is
somewhat mitigated via two channels. First, EU exporters gain market share in third countries at
the expense of American exporters who become less competitive due to a stronger dollar and more
costly imported inputs (see purple bars). Second, they would also gain market share in the US, at
the expense of Chinese exporters who are targeted with asymmetrically higher tariffs. At the same
time, this asymmetry also implies a larger ToT depreciation for China than for the EU, eroding the
competitiveness of EU exporters in the Chinese market (see red bars), and slightly raising EU
imports from China (blue bars in the top right panel). Graph II.1.2 also highlights the importance of
exposure to the US market: despite a similar rise in tariff rates, the decline in US-bound exports is
significantly smaller for the EU than for Mexico or Canada, who are more reliant on the US as an
export destination.
Graph II.1.2: Export decomposition (unilateral US tariffs on imports)

Notes: Export volumes are reported in %-deviation from baseline, with the contribution of various destination markets.

The EU’s trade balance would decline by about 0.3% of GDP (see bottom right panel of
Graph II.1.1). The flipside of a stronger dollar is a weaker (more competitive) real effective
(31)
This is a (partial) manifestation of the Lerner symmetry, which points out that a tax on imports behaves similarly to a
tax on exports.
(32)
The higher current account balance is also a reflection of a temporarily higher saving-investment differential in the US,
stemming from lower domestic demand (i.e. spending falling more than national income). This can also be broken down
as higher government budget balances, driven by tariff revenues of around 2.0-2.5% of GDP (while the net lending
balance of the private sector initially declines by a smaller amount).

65
 European Economic Forecast, Spring 2025

exchange rate for Europe. This does not only cushion the fall in EU exports (as discussed above),
but also reins in European import demand, inducing substitution towards domestically produced
goods that mitigates the fall in GDP and in the volume component of the trade balance. That said,
this volume component is still negative as exports initially decline more than imports.
The terms-of-trade loss makes the EU
Table II.1.1: Unilateral persistent US tariffs on imports
poorer. A depreciating terms-of-trade lowers the
2025 2026 2027
trade balance beyond the negative volume US
contribution and erodes the purchasing power of GDP (level, % dev) -0.6 -1 -1
European incomes beyond the fall in real GDP, CPI inflation (p.p. dev)
Trade balance (p.p. dev)
0.7
1.3
0.2
1.5
0.1
1.5
lowering real gross disposable income (rGDI) by Imports (level, % dev) -5.6 -9.3 -10.7
0.4% (see Graph II.1.3). (33) This real income loss ToT (level, % dev) 5.6 5.6 5.4

also weighs on EU consumption demand. EU27

GDP (level, % dev) -0.2 -0.2 -0.2
Inflation in the EU is likely to decline only CPI inflation (p.p. dev)0.0 -0.1 -0.1
mildly. Recessionary forces lower domestic Trade balance (p.p. dev)
-0.3 -0.3 -0.3
Exports (level, % dev) -1.1 -1.5 -1.4
inflationary pressures in Europe, but the exchange ToT (level, % dev) -1.1 -1.0 -0.9
rate depreciation in this scenario partly
Notes: Aggregated results for annual frequency. Deviations
counteracts this effect via rising import prices. relative to a scenario without tariffs.
Responding to lower inflation and slower growth,
monetary easing in Europe would provide some support to domestic demand.

Symmetric retaliation by all US trade partners

Retaliation by the EU and all other trading partners would be harmful for GDP in the US,
the EU and the rest of the world. The general result that tariffs hurt the economy of the
country that implements them applies also to retaliatory tariffs. In an alternative scenario,
illustrating a hypothetical “trade war”, we simulate symmetric retaliations by all trading partners
on imports from the US (see dashed lines in Graph II.1.3). In addition to deepening US GDP losses
relative to our central scenario (solid lines), retaliation also raises European GDP losses further, to
0.3-0.4% – despite mitigating the fall in the EU’s trade balance. At the same time, Europe’s ToT-
loss gets eliminated, so the EU’s real gross disposable income (rGDI) declines somewhat less in
this scenario. In contrast, by undoing the original ToT-gain of the US, together with deepening the
GDP losses, coordinated global retaliations hurt American rGDI markedly. The effects on the US
economy are larger, given that the tariffs affect the entirety of American trade flows, while for
other countries they are levied only on their trade with the US.

(33)
Real gross disposable income (rGDI) expresses the value of an economy’s output in terms of its domestic spending (i.e.
private and public consumption and investment). In other words, it reflects the purchasing power of the incomes earned
from domestic production. rGDI is equal to the sum of real GDP and the terms-of-trade gain.

66
 Special Issues

Graph II.1.3: Macroeconomic effects on the EU and the US under unilateral tariffs and retaliations.

Notes: The macroeconomic effects on the EU (blue) and the US (red) of unilateral US import tariffs (solid lines), with potential symmetric
retaliation from trading partners on imports from the US (“trade war” scenario, dashed lines). Tariff hikes are persistent (with quarterly AR1
coefficient of 0.975). Unless indicated, lines depict %-deviation of levels from no-tariff baseline. Real GDI refers to real gross disposable
income, which is real GDP complemented with the terms-of-trade gain.

These stylised simulations only cover selected channels of the tariff hikes. One important
caveat for the interpretation of the results is that the model simulations do not consider
productivity losses stemming from the lower exploitation of comparative advantages amid a more
fragmented global trade landscape and reduced gross trade flows. This channel could exacerbate
the negative economic consequences further. (34) In addition, while our macroeconomic model
suggests moderate aggregate effects on the EU, the impacts on specific Member States and
economic sectors could differ substantially.

Uncertainty and confidence shocks

A loss of confidence in the US economy and rising uncertainty further aggravate the
adverse economic consequences. The above model simulations, which only consider the direct
effect of tariffs, do not account for additional negative confidence effects, the extreme rise in
global trade uncertainty, or expectations about adverse productivity effects in the US – all of which
may hold back investment decisions and tighten financing conditions. The reaction of financial
markets following the 2 April announcement (e.g. the unusual combination of a falling dollar and
rising US Treasury yields) seems to indicate such forces are highly relevant in the current context.
To qualitatively illustrate the implications of these additional channels, we simulate a stylised
increase in the risk premium on USD denominated assets and US capital investments, on top of the
unilateral US tariff hikes discussed above. In the absence of a comparable precedent, precise
quantification is not feasible at this stage, so the exercise is purely illustrative.

(34)
While the model distinguishes between traded goods produced in different regions, it does not single out commodities
in general. Therefore, the effects of specific commodity price movements observed recently might not be captured
entirely.

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 European Economic Forecast, Spring 2025

Graph II.1.4: Macroeconomic effects on the EU and the US with unilateral tariff and risk premium shocks.

Note: The macroeconomic effects on the EU (blue) and the US (red) of unilateral US import tariff hikes only (solid lines), with additional
illustrative risk premium shocks on US financial assets and capital (dashed lines). Tariff hikes are persistent (with quarterly AR1 coefficient of
0.975. Unless indicated, lines depict %-deviation of levels from no-tariff baseline. Real GDI refers to real gross disposable income, which is
real GDP complemented with the terms-of-trade gain.

Higher risk premia on US assets raise interest rates further and induce a dollar
depreciation. In recent weeks, such USD depreciation has more than offset the appreciation
pressure that would be implied by unilateral US tariff hikes alone. However, as shown in
Graph II.1.4, despite a weaker nominal dollar, the US real exchange rate (and terms-of-trade) is
still expected to strengthen over time, only more gradually. While the more gradual terms-of-trade
appreciation supports US net export volumes relative to a pure tariff shock, the higher interest
rates induced by rising risk premiums dampen domestic capital accumulation and consumption
demand – on balance deepening the decline in US GDP. Moreover, the smaller terms-of-trade gain
lowers real gross disposable income even further. Therefore, although the US trade balance rises
more in this scenario (due to both a more competitive terms-of-trade as well as lower domestic
spending), it happens amid a more recessionary economic landscape.
For the EU, the consequences of the additional risk premium shocks are more contained,
as long as the loss of confidence concerns primarily the US (as assumed here). The stronger
euro weighs on the trade balance, but at the same time, investments also become relatively more
attractive in Europe, leaving the GDP response similar.

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 Special Issues

Box II.1.1: EU-US trade relationship through the lens of global value chains

The analysis in this Box looks at global trade from the point of view of integration in Global
Value Chains, with a focus on the EU-US relationship. In an increasingly challenging geoeconomic
landscape, the narrative of deglobalization has gained traction, claiming an ongoing process of fast
decreasing economic interdependence between different parts of the world. However, analysis in the
Autumn 2024 Forecast publication (1) presented new evidence of still expanding Global Value Chains
(GVC) in recent years (until 2022). The analysis presented in this box extends to 2023 and takes a
deeper look at the EU-US relationship through the lens of GVC.

EU-US trade links are analysed taking into account intra-EU trade relevant for GVC. This
analysis looks at EU trade from the perspective of Member States, treating intra-EU trade as equally
important as extra-EU trade in forging GVC, thus underscoring the importance of the EU’s single
market. While all EU Member States share a Common Commercial Policy (CCP) they nevertheless
constitute a very diverse group of economies with, namely, different structures, currencies and legal
systems. Thus, intra-EU trade exploits the same type of comparative advantages that motivate
countries to engage in GVC and should therefore not be ignored in the analysis. While accounting for
intra-EU flows naturally increases all measures of EU’s integration in GVC, it also puts the EU-US
relationship in a pragmatic perspective, in which the US becomes yet another important trading partner,
but for most Member States it ranks well behind their major EU export markets.

For both the EU and the US, participation in GVC increasingly relies on services. Eurostat’s
macroeconomic globalisation indicators based on the FIGARO database (2024 edition) (2) suggest that
in 2023 integration in GVC (3) rose further in the US and remained broadly stable in the EU (4).
Participation of the EU in GVC has been broadly stable over the two first decades of the century but
increased in the post-pandemic years. Total GVC integration rose from around 50% of gross exports
in 2010 to 54% in 2022 and 2023 (see Graph 1). This increase was driven by services whose
contribution doubled between 2000 and 2023. This occurred largely via backward participation – that
is, by relying on inputs from other countries in earlier stages of the value chain to produce goods that
the EU later exports further. The contribution of goods trade, while still accounting for two-thirds of
total GVC participation in 2023, has seen a steady decline in the past 25 years (from nearly 85% in
2000). Turning to the US (see Graph 1b), its participation in GVC moderated from 2010 until 2015 on
a declining importance of (backward participation) of goods, but started recovering as services took
centre stage, gradually lifting the contributions to US GVC indices from 9% in the early 2010s to 15%
in 2023. Services now account for half of US participation in GVC, compared to roughly one-third in
the first half of the previous decade. Services in US GVC predominantly represent intermediate inputs
that are further processed and exported by other countries (i.e. forward participation).

(1)
Box I.2.1 “Global trade outlook and the resilience of Global Value Chains” (Autumn 2024 Forecast)
(2)
FIGARO is the official global input-output tables released annually for the 27 EU Member States and its main
18 trade partners, including a rest of the world region for 64 industries and 64 products. More details at:
Rémond-Tiedrez, I., Rueda-Cantuche, J.M. (eds.) (2019). EU inter-country supply, use and input-output tables:
full international and global accounts for research in input-output analysis (FIGARO): 2019 edition, Publications
Office of the European Union. Luxembourg.
(3)
Total GVC participation indices are the sum of backward and forward participation rates. The backward
participation is calculated as a share of foreign value added in gross exports of an economy and is an indicator
of the extent of an economy’s use of foreign-sourced intermediates in the production of goods and services
for export. The forward participation is calculated as domestic value added generated in an economy due to
other countries’ exports as a share of a country’s gross exports. It is indicative of the extent to which an
economy’s exports of domestically produced inputs are used by the import countries for further processing and
exports in downstream production stages (WTO, Global Value Chain Development Report, 2023.). These indices
thus provide a comprehensive picture of an economy's involvement in GVCs, encompassing both the input and
output sides of global value chains.
(4)
In line with the adopted approach to account for intra-EU trade relevant for the GVC, throughout the box, GVC
participation indices of the EU are calculated as a (weighted) sum of individual Member States GVC.

(Continued on the next page)

69
 European Economic Forecast, Spring 2025

Box (continued)

Graph 1: Total GVC Participation indices - contributions from backward, forward, goods and services

55 % of total exports a. EU 40 b. US
% of total exports
50
35
45

40 30

35 25
30
20
25

20 15

15 10
10
5
5

0 0
10 11 12 13 14 15 16 17 18 19 20 21 22 23* 10 11 12 13 14 15 16 17 18 19 20 21 22 23*
BW -goods BW-services FW - goods FW - services BW -goods BW-services FW - goods FW - services

Notes: * preliminary estimate

Bilateral EU-US links via GVC have grown significantly over the past two decades. Trade in
intermediate goods between the EU and US propelled by expanding GVC has grown steadily as a share
of exports since 2010 (see Graph 2). In the EU, this was driven entirely by backward links, i.e. foreign
inputs imported by EU countries, processed domestically and later exported to the US. Over the past
14 years the share of these exports doubled in services and increased by one-third in goods (see Graph
2a). In contrast, forward integration, i.e. the share of EU value added embedded in exports to the US
that are processed there and later exported, remained broadly stable. These trends have lifted the
overall share of the US in EU’s GVC participation between 2010 and 2023 by roughly 1 pp, to 3.4% of
EU exports in 2023. This happened against a broadly stable contribution from the rest of the world
and a slight increase in contributions from intra-EU trade. When it comes to the US’ participation in
GVC, the contribution from the EU has grown even more. However, here EU’s input has been more
important on the side of forward participation, that is directly related to US exports to the EU that are
further processed and reexported by the EU. Expansion in these trade flows has been particularly
buoyant in services, the contribution of which roughly doubled in the last decade and now account for
more than half of the total trade (up from one-quarter in 2011).

Graph 2: Index of total participation in GVC: Bilaterial contributions to ...

a. EU GVC index, from exports to the US b. US GVC index, from exports to EU

3.5 14
% of total EU exports of % of total US exports of
goods and services goods and services
3.0 12

2.5 10

2.0 8

1.5 6

1.0 4

0.5 2

0.0 0
10 11 12 13 14 15 16 17 18 19 20 21 22 23* 10 11 12 13 14 15 16 17 18 19 20 21 22 23*
BW - goods BW - services FW - goods FW - services BW - goods BW - services FW - goods FW - services

Notes: * preliminary estimate

The EU plays a much greater role in US GVC than the US in EU’s ones. While expansion in
bilateral trade has supported GVC integration in both countries over the last two decades, there is a
stark difference in relative reciprocal importance. From the point of view of the EU, GVC-related intra-
EU flows are by far the most important, accounting for 60% of total EU exports in 2023, up from 56%
in 2011-2013, with a notable 2-pp-increase since 2019. GVC-related trade within the EU thus dwarfs
that with the US. The latter rose, as a share of total EU exports, from below 5% in 2010-2013 to 6.3%
in 2023 (see Graph 3a). By contrast, the EU remains by far the biggest partner in the GVC-related trade
in the US. The EU’s share more than doubled between 2011 (16.5%) and 2023 (35.4%), largely driven

(Continued on the next page)

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 Special Issues

Box (continued)

by the tripling of the contribution from Ireland, which in 2023 accounted for roughly one-third of the
EU’s input. This occurred against the backdrop of broadly stable shares of Canada and Mexico, declining
shares of Korea and Japan and a sharp reduction in the share of China due to its gradual retrenchment
from GVC (see Box I.2.1 in the Autumn 2024 Forecast).

Graph 3: Index of total participation in GVC: Share of main trading partners

a. EU b. US
Contributions % of total EU exports Contributions % of total US exports
100% 100%

80% 80%

60% 60%

40% 40%

20% 20%

0% 0%
10 11 12 13 14 15 16 17 18 19 20 21 22 23* 10 11 12 13 14 15 16 17 18 19 20 21 22 23*
US CN INTRA EU GB ROW EU CN CA MX ROW

Notes: * preliminary estimate.

Services lie at the heart of bilateral EU-US trade within GVC. While the importance of the US
to EU GVC integration is considerably smaller than the other way around for both goods and services,
a clear specialisation shapes the bilateral trade patterns. The share of both countries in respective
partners’ GVC is considerably higher in services than in goods, particularly in the case of EU’s input to
US GVCs. This is not surprising given that services have been driving both countries’ integration in GVC
over the past two decades (see Graph 1). However, backward links are more important for the US’
contribution to EU GVCs, while forward links are key to the EU’s contribution to US GVCs (see Graph 4).
In other words, where the US matters most for the EU is exports to the US that are related to processing
of intermediate goods and services previously imported by the EU. In contrast, the importance of the
EU in US GVC is key in the segment of exports to the EU that are further processed in and then exported
by the EU. The latter is where the EU becomes clearly indispensable for US integration in GVC. In 2023,
the domestic US value added embodied in the exports to the EU that are then further exported by the
EU accounted for 25.5% of all US exports in goods (up from 14.4% in 2011) and as much as 54% of
all US exports of services (up from 25.4% in 2011). The contribution from Ireland was instrumental in
driving up GVC trade in services between the EU and US, with the country accounting for nearly half of
all GVC-related exports from the US to the EU in 2023, up from 32% in 2011.

(Continued on the next page)

71
 European Economic Forecast, Spring 2025

Box (continued)

Graph 4: Bilateral importance of trade within GVC: Percentage contribution to the GVC participation

55 a. Goods - backward 55 b. Goods - forward

50 50
45 45
40 40
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
10 11 12 13 14 15 16 17 18 19 20 21 22 23* 10 11 12 13 14 15 16 17 18 19 20 21 22 23*

US EU US EU

55 c. Services - backward 55 d. Services - forward

50 50
45 45
40 40
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
10 11 12 13 14 15 16 17 18 19 20 21 22 23* 10 11 12 13 14 15 16 17 18 19 20 21 22 23*

US EU US EU

Notes: Blue line: Share of US in EU GVC, yellow line: Share of EU in US GVC.

* preliminary estimate

Both the EU and US are vulnerable to the intensification of bilateral trade tensions, but the
threat seems greater for large segments of the US integration in GVC. While the trade-
restrictive measures taken by the U.S concern trade in goods and the growth impact analysis of the
new tariffs rightly focuses on the fallout from disruptions to merchandise trade, it is trade in services
that has driven GVC in recent years and therefore appears key to their further expansion. The relative
importance of the bilateral EU-US relationship is also by far more critical for services than for goods
where diversification of trade is much higher, and both the EU and the US have many other important
trading partners. In services, however, the vulnerability of the US to the EU market appears very high,
with GVC-related exports to the EU accounting for roughly one-half of all US services exports. It is
therefore, in services rather than in goods, that the EU has a powerful potential leverage in trade
negotiations and disputes with the US.

Graph 5: Total GVC participation indices of EU Member States in 2023, contributions from the US, EU and rest of
the world

% of total exports % of total GVC index

100 % of US contribution to MS GVC 14

12
80
10
60 8

40 6

4
20
2

0 0
CY DK IE FI SK PT IT BE EU DE FR SE NL AT HU GR ES LU MT PL LT EE SI CZ LV BG RO HR
Contribution from rest of the world
Contribution from EU
Contribution from US
Share of goods in US contribution to the total GVC participation index (lhs)
Share of US in total GVC Participation Index (rhs)

(Continued on the next page)

72
 Special Issues

Box (continued)

Cyprus, Denmark and Ireland are most exposed to the US via GVC. The contribution of the US
to individual Member State’s integration in GVC varies significantly across the EU (see Graph 5). While
intra-EU trade dominates GVC-related trade for all EU MS, the US is nevertheless an important partner
for Cyprus, Denmark and Ireland, with absolute contributions exceeding 7 pps (of total exports), or
more than 10% of all GVC-related exports. Interestingly, exposure of Cyprus is concentrated almost
entirely in services, in the case of Denmark services account for less than 80%, while for Ireland only
43%. Other countries highly exposed to the US via GVC include Finland, Slovakia, Portugal, Italy and
Belgium – all predominantly in goods, with the exception of the latter where exposure is equally divided
between goods and services. Overall exposure of most Central and Easter European (CEE) countries
(except Slovakia) remains relatively low, with the lowest in Bulgaria, Romania and Croatia. However, in
view of current tensions concerning merchandise trade, the overall share of goods in GVC-related trade
with the US is particularly relevant. From this perspective exposure of the CEE and several southern
European countries appears remarkably high, with more than 80% of GVC links with the US accounted
for by goods in Slovakia, Italy, Austria, Slovenia, Czechia, Hungary and Portugal.

73
 2. BUSINESS ADJUSTMENT TO TENSIONS IN FOREIGN
MARKETS AND DRIVERS OF CONSUMERS’ VIEWS ON THE
ECONOMY: SURVEY EVIDENCE
In February/March 2025, the Commission’s harmonised business and consumer surveys included
additional ‘ad hoc’ questions investigating 1) the extent to which European firms adjust their
business strategies in response to tensions, disruptions or policy changes in foreign markets, and
2) the impact of selected factors on consumers’ views of their country’s economic situation. (35)
This Special Topic summarises the results of the two ad hoc surveys.

European firms’ strategic response to tensions, disruptions and policy changes in foreign
markets
Increasing geopolitical tensions and trade fragmentation challenge the resilience of
global value chains, by undermining the collaborative networks on which they depend. As
countries impose trade restrictions or become less dependable partners, companies may
reconfigure their supply chains, redirect output to new markets, or relocate production or
operational hubs to more stable or 'friendly' countries. The set of four ad hoc questions included in
the February/March waves of the business surveys investigated these adaptive strategies and their
potential impacts on operational costs and output prices. The results of this ad hoc survey must be
interpreted against the backdrop of mounting challenges to the global trade environment posed by
the recent turn towards protectionism in the US. While the questions were asked before the
announcements of new US tariffs on goods imports from the EU, the new US administration had
already clearly signalled its sharp protectionist shift.
Twelve EU Member States, representing 63% of EU GDP took part in the ad hoc survey,
though not always covering all four sectors. In the EU, more than 44 000 firms took the ad hoc
survey. Of these, firms in the manufacturing and services sectors accounted for around 30% each;
construction and retail trade made up another 20% each of the sample. To derive EU and cross-
sector country estimates, the results were aggregated using weights based on gross value added
in each country and sector. All figures reported in this text are weighted averages.
The questions read as follows:
Q1. Have you adjusted, or plan to adjust, your strategies regarding the sourcing of inputs, location
of production, or destination markets in recent years, in response to tensions, disruptions or policy
changes in your foreign markets?
− yes, we have adjusted our strategies;
− yes, we plan to adjust our strategies;
− no, we have not adjusted our strategies and don’t plan to do so;
− not applicable, fully domestic business.
Firms that responded to this question with either "yes, we have adjusted our strategies" or "yes, we
plan to adjust our strategies" were subsequently asked the following questions:
Q2. The adjustments are or will be of the following nature (multiple answers possible)?
− increasing stocks to serve as buffers in the face of unexpected disruptions;
− changing the countries from which you source inputs/goods or to which output is destined;
− relocation of production/operation back to your country (reshoring);
− relocation of production/operation to other countries (friendshoring).
− other.

(35)
The ad-hoc questions were optional for national partner institutes in the harmonised business and consumer surveys,
and they could choose to include them in either the February or March survey, with the overall survey period running
from early February to 21 March.

74
 Special Issues

Q3. What is or would be the effect on your production costs or operational costs?
− an increase;
− no impact;
− a decrease.
Q4. What is or would be the effect on your final prices charged to consumers/customers?
− an increase;
− no impact;
− a decrease.
A large share of EU firms is exposed to Graph II.2.1: Intention to adjust strategy, by sector
foreign markets, most of them in the
manufacturing sector. Roughly 40% of all
Total
enterprises identified themselves as fully 19.2 8.1 32.2 40.5

domestic businesses (see Graph II.2.1). As to be

INDU 36.3 12.8 39.7 11.3
expected, this share was lowest in manufacturing
(11%), implying that this sector is most exposed
SERV 13.8 6.4 23.1 56.6
to foreign markets and involved in global value
chains. EU construction, services and retail trade RETA 14.7 7.7 30.4 47.2
all recorded a share of just below or above 50%.
Of the 60% of firms with external trade ties, BUIL 7.5 3.7 28.3 60.5
slightly more than half replied that they had not
adjusted and were not planning to adjust in 0% 20% 40% 60% 80% 100%

response to tensions, disruptions or policy

Yes Yes, plan to No Not applicable (domestic business)
changes in foreign markets. This left around 27%
of firms either reporting to have already adjusted
their strategies (19%) or planning to do so (8%). Again, industry stands out, as the majority of
adjusting firms operate in this sector (55%), followed by services (20%) and retail trade (17%).
Firms in the construction sector with international trade ties and adjusting are relatively few (8%).
Changing trade partner was the most likely response to tensions, disruptions or policy
changes in a firm’s foreign markets. Among EU firms that adapted or planned to adapt their
strategies, the measure most often cited is ‘changing the countries from which we source
inputs/goods or to which output is destined’ (38%). In industry, this strategy was reported by
almost 46% of firms.
Firms also raised their inventories, likely to Graph II.2.2: The adjustments are or will be of the
improve resilience. For 22% of all adjusting following nature, per sector

firms, and 27% of adjusting firms in industry, the

adaptations consisted of ‘increasing stocks to Total 21.9 37.6 7.5 13.5 36.0

serve as buffers in the face of unexpected

INDU 27.4 45.9 4.0 14.8 23.8
disruptions’. In the post-pandemic period, keeping
higher stocks may be more than just a temporary SERV 20.2 37.5 8.3 16.6 45.5
response to a specific disruption. There is growing
evidence that firms are maintaining higher buffer RETA 25.7 40.3 5.0 8.7 35.6

stocks of critical inputs and finished goods to

BUIL 22.2 29.0 9.1 3.1 31.0
reduce exposure to single-source or foreign
suppliers and to hedge against price volatility. 0 50 100 150
This is observed especially in intermediate goods % of surveyed firms
Increasing stocks Changing trade partners
and capital goods sectors, semiconductors, and Reshoring Friendshoring
pharmaceuticals. Empirical studies also show a Other
statistical link between trade policy uncertainty

75
 European Economic Forecast, Spring 2025

and higher inventory holdings, especially in global value chain-intensive industries. (36)
“Other” adjustments were reported most prominently in the services sector. Across
sectors, a relatively high share of firms (36%) reported “other” adjustments. Additional strategies
identified in the literature include vertical integration, digitisation, and enhanced supply chain
monitoring. The European Investment Bank's survey on supply chains provides evidence of these
strategies. (37) Within sectors, nearly a quarter of manufacturing firms reported adopting
alternative measures, while the services sector reported the highest share, at over 45%. This may
relate to the sector's specific methods for adapting to changes in the trade environment, such as
service modularisation and increased investment in compliance and risk monitoring to effectively
navigate regulatory shifts
Among the firms considering to re-locate their production or operations, most consider
relocating to another country rather than back to their country. Offshoring firms and
multinational enterprises may also find it necessary or advantageous to relocate their production
or operations to other countries or bring them back to their home country. Of the 21% firms that
chose to relocate, a large majority — almost two thirds — considered relocating to other countries
(friendshoring) rather than moving operations/production back to their country (reshoring)’. In
industry, almost one fifth considered relocating their production hubs, of which four fifths
preferring to move to another country rather than re-shoring. Moreover, a higher share of firms in
services reported a preference for reshoring activities than in industry.
More firms expect incurred costs and prices charged to increase than to decrease. (38)
Around 38% of the adjusting firms expect the changes in their trade strategies to lead to an
increase in their production or operational costs, while 17% anticipate a decrease. The distribution
of these responses is similar across the industry, services, and construction sectors, whereas nearly
half of retailers expect an increase in operational costs. Regarding the effect on prices charged to
customers or consumers, a majority of adjusting firms (57%) at total sector level expected prices
not to change as a consequence of changing strategies, while close to a third expected prices to
increase. Very few firms (4%) expected prices to decrease. A slightly smaller share of firms in
industry expected prices to increase.

(36)
See McKinsey & Company (2021) "Taking the pulse of shifting supply chains"; OECD (2024) "Promoting resilience and
preparedness in supply chains; European Central Bank (ECB) Economic Bulletin, Issue 8, 2023; and International
Monetary Fund (IMF) – World Economic Outlook, April 2023.
(37)
The SUCH supply chain survey carried out by the European Investment Bank in cooperation with the European
Commission (DG GROW) in 2023 singles out Investment in digital inventory and inputs tracking, which allow firms to
track goods through the supply chain and delivery to their premises.
(38)
Graph II.2.3 for question 3 excludes data for Italy. The response shares for question 3 and question 4 would otherwise
not be directly comparable, as question 4 was optional to reduce the survey burden in some countries participating to
the ad hoc survey. As such, question 4 was not asked in Italy, a sufficiently large country to make a difference when
aggregating the results and drawing conclusions.

76
 Special Issues

Graph II.2.3: Effect on production and final prices

a. Effect on production or operational costs b. Effect on final prices charged to consumers

Total 37.6 38.5 17.2 6.6 Total 31.3 57.4 4.1 7.1

INDU 39.2 40.2 17.6 3.1 INDU 26.2 64.3 5.4 4.1

SERV 36.3 44.7 17.0 1.8 SERV 34.3 60.0 3.9 1.8

RETA 48.3 35.4 14.7 1.6 RETA 41.8 52.7 4.6 0.9

BUIL 44.2 27.6 12.4 15.8 BUIL 38.8 44.5 1.9 14.8

0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%

Increase No impact Decrease No reply Increase No impact Decrease No reply

The results indicate that firms will not necessarily pass on higher costs to prices but
increase profit margins if costs become lower because of changing strategies. More firms
expect costs to increase (38%) than prices to increase (31%). This is true at sectoral level as well.
Conversely, the share of firms expecting prices to decrease (4%) is lower than the share expecting
costs to decrease (17%). In the absence of microdata allowing to match firms’ replies to the two
questions, these results can only be tentatively suggestive of some degree of profit squeeze when
costs increase and pricing power by firms when costs decrease.

The impact of selected factors on consumers’ views of the economy

Consumers' views on their country’s Graph II.2.4: EU estimate (*) - Consumer confidence and
economic situation are a key driver of component contributions (mean adjusted)

consumer sentiment , (39)

particularly in 15

economic downturns or times of economic 10

uncertainty. The Commission’s consumer survey 5

enquires about consumers’ assessments of the 0
economic situation in their country – both in the -5
12 months preceding and following the survey.
-10
After collapsing in the aftermath of the pandemic
-15
shock and quickly rebounding thereafter,
-20
consumers’ views on the general economic 2020 2021 2022 2023 2024 2025
situation plummeted again in autumn 2022, as Intentions to make major purchases
inflation peaked at two-digit levels. They have General economic situation over the next 12 months

partially recovered since then but remain below Financial situation over the next 12 months
Financial situation over the last 12 months
their respective long-term averages and Consumer confidence
significantly lower than their pre-COVID-19 levels.
(*) see footnote 39
Since summer 2024 they have been worsening
again. As one of the four variables making up the Commission’s consumer confidence indicator,
consumers’ expectations about their country’s economic situation is the component contributing
most to the changing moods of consumers since 2020 – and consistently dragging consumer
confidence down since early 2022 (Graph II.2.4).

(39)
In this box, EU aggregates are calculated as population-weighted averages of the results for the 13 countries that
carried out the ad-hoc question, namely Austria, Bulgaria, Cyprus, the Czech Republic, Germany, Finland, Croatia,
Hungary, Italy, Latvia, Malta, Poland and Slovakia. In terms of population, these countries represent around 52% of the
EU-wide aggregate.

77
 European Economic Forecast, Spring 2025

Table II.2.1: Factors and examples provided to respondents.

Factor Examples
Labour market Unemployment rate, job availability, job improvement
Inflation/Cost of living Prices, purchasing power
Interest rate developments Borrowing costs, return on investment
Taxation, public spending, in particular on social benefits and
Changes in taxes and public spending
pensions
Important political initiatives, new legislation, changes in
Political developments in your country
government
International conflicts, changes in foreign governments, trade
Global developments and trade policies
policies

Technological change New technologies and innovations (artificial intelligence, …)

Climate change Environmental issues and global warming

An ad hoc question in the European Commission’s consumer survey explores the impact
of selected factors on consumers’ views on their country’s economic situation. The
question was formulated as follows: "Over the past 12 months, how have the following factors
influenced your views about the economy of your country?”. Table II.2.1 displays the factors that
were presented to consumers. For each factor, respondents could select one of four answer
options: ‘Positive impact’, ‘Negative impact’, ‘No impact’, or ‘Don't know’. To enhance clarity,
examples were provided for each factor. Thirteen EU countries, accounting for 52% of the EU
population, participated in the ad hoc survey. The results presented in this Special Topic (40) must be
interpreted in the context of the increasingly complex and unpredictable economic and geopolitical
landscape facing the EU economy. At the same time, falling inflation, a resilient labour market, and
more favourable financing conditions for households and firms laid the foundation for a gradual
recovery in consumption in the EU.
Most factors were assessed as negatively Graph II.2.5: EU estimate results
impacting the economy, with the cost of
living remaining the most widespread Inflation/Cost of living 6.411.1 76.3 6.3

concern (see Graph II.2.5). Although inflation in Global developments and

trade policies
9.3 15.3 63.5 12.0
the EU in March 2025 was back to 2.4%, over Political developments in your
13.8 18.1 59.5 8.6
country
three-quarters of respondents still reported Climate change 7.4 25.6 56.8 10.3
inflation and the cost of living to negatively Changes in taxes and public
9.7 22.0 56.7 11.6
impact the economy of their country. This feature spending
Labour market 14.8 24.3 49.7 11.2
was shared across all participating countries and
likely reflects the legacy of the recent inflationary Interest rate developments 15.1 20.7 47.4 16.9

surge, which significantly eroded the purchasing Technological change 37.8 25.3 23.0 13.9

power of consumers and left prices for essential 0 50 100

goods and services significantly higher. Other percentage (%)

factors viewed negatively by most respondents Positive impact No impact Negative impact Don't know

and in most countries included global

Factors are ranked by share of 'negative impact' (weighted) views
developments and trade policies, domestic (from highest to lowest).
political developments, climate change and public
policy (i.e. changes in taxes and public spending). (41)
The results for the labour market and interest rate developments are more mixed
across countries. In a context of resilient labour markets and easing, but still relatively high,
interest rates, the picture is more mixed when examining how the labour market situation and
(40)
More detailed results are available in European Business Cycle Indicators: The impact of selected factors on consumers'
views of the economy. 1st Quarter 2025.
(41)
In Germany, the ad hoc question was asked before Parliament approval of the plans for a significant spending surge on
infrastructure and defence.

78
 Special Issues

interest rate developments are reported to impact the economic situation. In six countries, the
labour market was largely perceived as a negative factor for the economy, while interest rate
developments were predominantly viewed negatively in five countries.
Technological change was the only factor for which positive views prevailed over
negative ones. As many as 37.8% of respondents reported technological change as a positive
factor for the general economic situation, against less than a quarter viewing it negatively and
another quarter considering they have no impact on their assessment.
The age of interviewees significantly Graph II.1.6: Impact of the different factors by age
influenced their responses. Younger individuals group - percentage balance (42)
(18-29 years) tend to be more optimistic, or less
pessimistic, about the impact of all factors, and in Inflation/Cost of living

particular technological change, global Global dev. and trade policies

developments, and – perhaps unexpectedly - Climate change
climate change (see Graph II.1.6). While a Changes in taxes and public
majority of both older and younger respondents spending

considered inflation as an important negative Political dev. in your country

factor, older respondents do so more often than Labour market

younger ones. Interest rate dev.

Other socio-demographic characteristics Technological change

play a role. The unemployed, lower income -80 -60 -40 -20 0 20 40

groups and older individuals tend to refer to both Percentage balance

labour market (see Graphs II.1.6 and II.1.7) and Younger (18-29) Older (65+)

interest rate developments as negatively

affecting their views on the overall economy, whereas people in employment, with higher incomes
and/or higher education and young individuals are more likely to view these two factors as positive.
Higher income and education groups, as well as employed individuals are also likely to view
technological changes as having a (more) positive impact on the economy, whereas the lowest
income groups and the unemployed view them dominantly negatively (see Graph II.1.8). Strikingly,
concerns about Inflation/cost of living rank high in consumers’ concerns across socio-demographic
groups, i.e. across income quartiles, employment status groups and sex. Finally, respondents with
lower income, lower education, and the unemployed tend to exhibit a higher share of ‘don't know’
responses.

Graph II.1.7: Factor "labour market" - percentage Graph II.1.8: Factor "technological change" -
balance (42) percentage balance (42)
20 40
10 35
30
0
25
Pecentage balance

Pecentage balance

-10 20
-20 15

-30 10
5
-40
0
-50 -5
-60 -10
Further
1st quart.

2nd quart.

4th quart.

Unemployed
3rd quart.

Total employed

Primary

Secondary
Primary
1st quart.

2nd quart.

4th quart.
3rd quart.

Unemployed

Further
Total employed

Secondary

Income quartile Employment Education Income quartile Employment Education

status status

(42)
The percentage balance represents the difference between the percentage of respondents who believe a factor has a
positive impact on their country's economy and the percentage who believe it has a negative impact.

79
 European Economic Forecast, Spring 2025

80
3. THE ECONOMIC IMPACT OF HIGHER DEFENCE SPENDING
Increasing geopolitical tensions have brought to the fore the need to strengthen the EU’s defence
capabilities. The Readiness 2030 package, put forward by the European Commission in March,
aims to support Europe’s defence industry, deepen the single defence market and facilitate the
stepping up of defence spending, inter alia through fiscal flexibility. The stylised simulations
presented in this box, using the QUEST macroeconomic model, estimate the impact on economic
activity and EU government debt of a linear increase in defence spending by up to 1.5% of GDP,
starting this year and until 2028. The results of the main scenario show that real GDP would rise
by 0.5% above the baseline by 2028, while the EU government debt-to-GDP ratio would be 2 pps.
above the baseline by 2028. A higher share of spending devoted to R&D and infrastructure
investment could generate more positive GDP effects in the longer term, while a higher import
content of defence spending would reduce the overall economic stimulus. The macroeconomic
effects will also depend significantly on factors that are not explicitly modelled, such as
production capacity constraints as well as uncertain R&D spillovers. Importantly, the QUEST
simulations - based on simplified assumptions and referring to the EU as a whole - are
analytically distinct from the surveillance under the EU fiscal framework. (43)
A rapidly deteriorating strategic environment calls for a significant increase in EU
defence spending. Russia’s war of aggression in Ukraine and decades of underinvestment in
defence have underscored the EU’s vulnerability to external threats. This, together with the
changing focus of traditional allies and partners, such as the US, to other regions of the world, has
prompted a reassessment of the security risks faced by the EU. Additionally, rapid advancements
in technologies for defence purposes and evolving warfare techniques, including through cyber and
hybrid threats, require adaptation and modernisation of Europe’s defence capabilities. In this
context, to restore credible deterrence, the EU faces the imperative of increasing and potentially
reorienting defence capabilities.

Defence spending in EU Member States

Defence spending in the EU as a whole used to be low in international comparison but
has started to grow in recent years. Since the beginning of the 1990s, following the end of the
Cold War, Europe has enjoyed a ‘peace dividend’ that allowed restraining expenditure on defence.
Based on COFOG data (44), defence spending in the EU27 reached a trough of 1.1% of GDP in 2014,
the year of Russia’s illegal annexation of the Crimean Peninsula. In recent years, Europe has
worked ever more closely within NATO to respond to security threats. Defence expenditure in the
Union increased to 1.3% of GDP in 2023, and it is estimated to have risen further in 2024,
especially in Member States closer to the Russian border (see Graph II.3.1 for trends in the EU and
Graph II.3.2 for a cross-country comparison). Defence expenditure as reported by NATO (for the EU
members of the Alliance), which is methodologically somewhat different from COFOG figures,
reached the 2% of GDP NATO target in 2024, though important differences remain across Member
(43)
The 1.5% of GDP maximum flexibility for additional defence spending broadly corresponds, at aggregate EU level, to
the adjustment over 2025-2028 that is needed to comply with the requirements of the EU fiscal framework. Therefore,
even after using the full flexibility allowed by the clause, the underlying EU fiscal position in 2028 would not be worse
than in 2024. In any case, public debt ratios higher than 60% of GDP will have to be put on a steady downward
trajectory in the medium term, with the use of the national escape clause only temporarily delaying the start of this
decline in some Member States.
(44)
Classification of Functions of Government (COFOG), published by Eurostat. These data are compatible with national
accounts data and EDP reporting used in fiscal surveillance.

81
 European Economic Forecast, Spring 2025

States. (45) From an international perspective, EU Member States on average still spend less on
defence than the US (2.9% of GDP in 2023) or the UK (2.1% in 2022). (46)
Defence spending in the EU is geared towards current expenditure, mainly compensation
of employees. According to COFOG data, compensation for military and civilian personnel
represents a significant share of current expenditure on defence, especially in countries with larger
standing armies (see Graphs II.3.1 and II.3.2). Intermediate consumption, including items such as
fuel, spare parts, maintenance, utilities, and outsourced services, has been growing due to rising
operational costs and increased reliance on private-sector contractors for logistical and support
functions. Capital formation, which reflects long-term investment in military capabilities including
military infrastructure, new equipment such as aircraft, warships and tanks, as well as ammunition
and missiles inventories, accounts for a relatively small share of defence expenditure in the EU,
despite an increase in recent years. In 2023 it amounted to 19.5% of defence expenditure in the
EU, compared to 40.7% in the US. Public research and development (R&D) expenditure on defence
decreased over time to just 0.02% of GDP in 2023, compared to 0.3% in the US. Foreign military
aid has increased significantly in recent years, largely on the back of military support to Ukraine. In
contrast, compensation of employees accounted for 38.5% of US defence expenditure in 2024
while capital formation amounted to 33.5%.
Graph II.3.1: The evolution of EU defence expenditure and its composition

% of total % of GDP
100 1.7
90
1.6
80
70 1.5
60 1.4
50
40 1.3

30 1.2
20
1.1
10
0 1.0
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Compensation of employees Intermediate consumption Gross capital formation

Foreing military aid R&D Other
Total (rhs)

(45)
An important difference between COFOG and NATO figures is that downpayments for military equipment affect the
NATO figures immediately, whereas in national accounts including COFOG the impact of the same equipment will
materialise later, at the time of the delivery of this equipment. There are also some differences in scope between the
NATO and COFOG definitions, but these are not expected to lead to systematic differences between the two
aggregates. According to NATO, seven countries out of the 23 EU Member States that are also NATO members spent
less than 2% on defence in 2024. See: NATO (2025): The Secretary-General’s Annual Report 2024. North Atlantic
Treaty Organisation (link).
(46)
US figures are based on NIPA table 3.11.5 of the Bureau of Economic Analysis; the UK figure is based on IMF
government finance statistics. These are based on the same methodology as the Eurostat figures for the EU.

82
 Special Issues

Graph II.3.2: EU defence expenditures by Member States in 2023

% of total % of GDP
100 3.5
90
3
80
70 2.5
60 2
50
40 1.5
30 1
20
0.5
10
0 0

Share of current expenditure Share of capital expenditure Defence expenditure as % of GDP (rhs)

Notes: Capital expenditure includes gross capital formation and capital transfers.
Sources: Eurostat, Bureau of Economic Analysis.

The EU has a solid domestic production base of defence goods, but high fragmentation
contributes to high import dependence. Although several globally competitive companies
operate mostly in a few large Member States, the European defence industry is characterised by
mainly national companies catering for domestic markets in relatively small volumes.
Consequently, the EU’s defence efforts remain fragmented, with over 170 different weapons
systems in use compared to 30 in the US. (47) Low collaboration among European producers inhibits
economies of scale, raising unit costs, hindering technological development and reinforcing the
EU’s dependence on imports from the US. The US is the EU’s largest supplier of defence
equipment, and its role has grown significantly in recent years. According to data by the Stockholm
International Peace Research Institute (SIPRI), arms imports by European NATO members more
than doubled from 2015–19 to 2020–24, and the share of imports from the US rose from 52% to
64%. The EU largely relies on the US for critical systems such as missile defence, aircraft engines,
and drones, where European alternatives are often less technologically developed or
uncompetitive. Without greater consolidation of its defence industry and procurement policies, the
EU will struggle to reduce its dependence on external suppliers, limiting its strategic autonomy.

The Readiness 2030 Plan

The Readiness 2030 (48) package provides financial levers to increase defence
capabilities in the European Union. To allow for a rapid ramp up in defence expenditure, the
European Commission has invited Member States to request the activation of the national escape
clause (49) of the Stability and Growth Pact in a coordinated way. By the cut-off date of the
forecast, a majority of Member States has already decided so. (50) This flexibility would allow
Member States to temporarily exceed the net expenditure paths set out by the Council to finance
increased defence spending. To safeguard fiscal sustainability, the Commission has framed the
timing and scope of the national escape clause: the flexibility for higher defence spending is
capped at 1.5% of GDP compared to a base year and will be available for a period of four years
(2025-2028). (51) The expenditure qualifying for the clause is defined on the basis of the statistical
category ‘defence' in COFOG. The plan also aims to help countries invest in defence through a
(47)
Source: Munich Security Report 2017 (link).
(48)
See the Joint White Paper for European Defence Readiness 2030, JOIN(2025) 120 final (link).
(49)
See Article 26 of Regulation - EU - 2024/1264 - EN - EUR-Lex.
(50)
Belgium, Bulgaria, Denmark, Germany, Estonia, Greece, Latvia, Lithuania, Hungary, Poland, Portugal, Slovenia, Slovakia,
and Finland. See the Council press release of 30 April 2025: https://www.consilium.europa.eu/en/press/press-
releases/2025/04/30/coordinated-activation-of-the-national-escape-clause/
(51)
See the communication “Accommodating increased defence expenditure within the Stability and Growth Pact”, C(2025)
2000 final (link).

83
 European Economic Forecast, Spring 2025

EUR 150 bn loan instrument (Security Action for Europe, SAFE) (52) support to the EIB group in
widening the scope of its lending to defence and security projects, and the acceleration of the
Savings and Investment Union to mobilise private capital.

Potential fiscal and macroeconomic impact of higher defence spending

Simulating the impact of increased defence spending on growth and the general
government debt through a macro model requires several assumptions. (53) In the QUEST
simulations presented in this box, the following assumptions are made:
• The additional defence spending is assumed to increase linearly until 2028, reaching 1.5% of
GDP. This additional spending is assumed to be fully debt-financed. Such gradual spending
profile appears appropriate in view of the potential bottlenecks in ramping up the EU’s defence
capabilities. After 2028, the simulations are based on the technical assumption that defence
spending remains above the baseline for decades to come (54), increasingly financed by a broad-
based tax increase, while non-defence government expenditure remains constant as a share of
GDP.
• Further, it is conservatively assumed that only 10% of defence spending contributes to
productivity gains, broadly corresponding to the current share of infrastructure and R&D
spending within overall defence budgets in the EU. An alternative scenario explores the effect
of a higher share of productivity-enhancing spending.
• Lastly, the main scenario assumes an approximately 20% import content of the additional
defence spending. (55) Another alternative scenario considers a higher import leakage of military
spending, reducing the stimulus's impact on the EU economy.
Graph II.3.3: The impact of higher defence spending on real GDP and general government debt in the EU

a. Impact on the level of EU real GDP b. Impact on EU general government debt

0.6 % 6 % of GDP

0.5 5

0.4 4

0.3 3

0.2 2

0.1 1

0.0 0

-0.1 -1
2025 2026 2027 2028 2029 2030 ...2034 2025 2026 2027 2028 2029 2030 ...2034

Main scenario "Higher productivity" "Higher imports" Main scenario "Higher productivity" "Higher imports"

Economic activity increases moderately in the short term as the shift towards defence
spending crowds out private demand, while the EU debt-to-GDP ratio rises compared to
the baseline. According to the simulation results, the level of EU GDP rises to a limited extent, by
(52)
See Commission’s proposal for a Council Regulation establishing the Security Action for Europe (SAFE) through the
reinforcement of European defence industry Instrument. COM(2025) 122 final (link).
(53)
We use a two-region variant of DG ECFIN’s QUEST model, featuring the EU and the rest of the world. The model
incorporates different fiscal policy instruments, including productive government investment, as well as forward-looking
decisions and endogenous adjustments in interest rates and prices.
(54)
Defence spending is modelled as a combination of current public expenditure and public investment. The latter
enhances productivity for the private sector.
(55)
The Draghi report cites “78% of procurement spending [in 2022-2023] was diverted to purchases from suppliers
located outside the EU”. Others question these figures, indicating that most military equipment spending is directed
towards domestic producers, with imports accounting for less than 10% of total expenditure; see: Mejino-López, J. and
Wolff, G. (2024). What role do imports play in European defence? Bruegel (link).

84
 Special Issues

0.3% to 0.6% above the baseline by 2028 (depending on the scenario, see Graph II.3.3). (56) EU
public debt rises 2 pps. above the baseline in 2028, continues rising until 2032, and then gradually
declines towards the baseline due to the tax increase starting in 2029. The muted effect on
economic activity is due to the forward-looking behaviour of agents who anticipate higher future
taxes in response to higher public debt, and to higher interest rates as increased spending drives
up prices in the short term while higher debt also raises risk premia. The level of real GDP remains
above baseline in the medium run (0.3% in 2034 in the main scenario). At the same time, the
central bank’s response and the associated slowdown of private demand limits inflationary
pressures (inflation remains around 0.2 pps. above baseline on average until 2028).
In the medium to long term, higher R&D spending and infrastructure investment could
further boost the positive impact of defence spending on EU GDP. The “higher productivity”
scenario, which assumes a 20% share of capital spending in total defence expenditure with higher
benefits to private sector productivity, raises the medium-term GDP level by an additional
0.2 pps. (57) By contrast, a higher import content of defence spending reduces the overall economic
stimulus in the EU.
These stylised simulations focus on selected channels under simplified assumptions and
are not intended to serve as a debt sustainability analysis. Three caveats are noteworthy.
First, production capacity constraints and labour supply shortages can limit the ability to rapidly
scale up defence spending (Antonova et al., 2025). (58) (59) Without sufficient capacity, short-term
demand increases may drive up prices rather than GDP. While the assumed gradual increase in
defence spending is intended to allow for a slow adjustment to frictions, the simulations do not
include more specific assumptions on labour supply constraints and product market frictions.
Second, the scenarios presented here do not include any productivity spillovers beyond the regular
productivity impact from public capital spending. However, the literature suggests that in the
longer term, defence R&D spending can also spur private R&D, leading to small but statistically
significant productivity gains (Moretti et al., 2025). This is consistent with findings of a positive
long-run effect of defence R&D spending on GDP in the US (Antolin-Diaz and Surico, 2024). (60)
Such benefits could accrue mostly in Member States producing advanced military equipment. As a
final caveat, these stylised EU-wide simulations are separate from and do not pre-empt the
formal, country-specific assessments of fiscal sustainability, which will follow the activation of the
national escape clause.
The estimated impact on economic activity is within the broad range reported by the
literature. For a comprehensive literature review, see e.g. Ilzetzki (2025). (61) The available studies
aligning with the Keynesian view argue that military expenditure stimulates aggregate demand,
creating jobs and driving investment, particularly during economic downturns. For example,
Barro (1990) suggests that in the short term, defence spending acts as a fiscal stimulus through
(56)
The multiplier measures how much economic output increases for each unit of government spending. In the QUEST
model, multipliers are not fixed parameters. They vary depending on the specific fiscal instruments used and a range of
other factors, such as the economic environment, the timing of the measures. Typically, for the EU as a whole, the
multiplier for a short-lived government spending program is around 0.7-0.8, which aligns well with the literature, see
e.g. Coenen, G. et al. (2012). Effects of fiscal stimulus in structural models. American Economic Journal:
Macroeconomics 4(1): 22-68. However, a longer spending program, as considered here, raises the need for future
financing, which dampens the growth effects, in addition to import leakages. Moreover, the demand effects only
materialise gradually in line with the assumed slow increase in defence spending. Consequently, under these
assumptions, the model indicates smaller multipliers.
(57)
Antolin-Diaz J. and Surico P. (2024). The Long-Run Effects of Government Spending. American Economic Review
(forthcoming). The authors estimate that an increasing share of government spending going to R&D is associated with
persistent increase in output and TFP.
(58)
Antonova, A., Luetticke, R., and Müller, G. J. (2025). The Military Multiplier. Mimeo (link)
(59)
While the production of military equipment is capital intensive, an increase in military personnel can raise labour
demand more substantially, especially among younger cohorts.
(60)
Moretti, E., Steinwender, C., and Van Reenen, J. (2025). The Intellectual Spoils of War? Defense R&D, Productivity and
International Spillovers. Review of Economics and Statistics 107: 14-27. Antolin-Diaz, J. and Surico, P. (2024). The Long-
Run Effects of Government Spending. American Economic Review (forthcoming).
(61)
Ilzetzki, E. (2025). Guns and growth: The economic consequences of defense buildups. Kiel Report No. 2, Kiel Institute
for the World Economy (IfW Kiel).

85
 European Economic Forecast, Spring 2025

the multiplier effect. In contrast, the neoclassical approach highlights long-term crowding-out
effects as higher military expenditure can reduce private investment and increase fiscal deficits
(Deger and Smith, 1983; Barro and Sala-i-Martin, 1992). (62) Empirical findings on the multiplier
effect are mixed. Some papers report a positive correlation between defence spending and
economic growth particularly in the US (Atesoglu and Mueller, 1990; Ando, 2018), while others find
negligible or negative effects, especially in Europe (Dunne and Nikolaidou, 2012; Kollias and
Paleologou, 2016). (63) Cross-country studies yield inconclusive results, suggesting that the impact
varies by context, spending levels, and time horizon (Landau, 1996; Hou and Chen, 2014; Gómez-
Trueba Santamaria et al., 2021). (64)

Defence spending in the Spring 2025 Forecast

While the simulations present the potential effects of higher defence expenditure, the
forecast only includes so far credibly announced and sufficiently detailed measures. The
Commission’s forecasts assume a continuation of existing budgetary policies, which is commonly
referred to as the no-policy-change assumption. This means that the forecast does not make
assumptions on policy choices still to be taken. Only those measures that have been credibly
announced and sufficiently detailed by the cut-off date of the forecast (30 April) are taken into
account. On this basis, the level of defence spending in the EU is estimated to have increased from
1.3% of GDP in 2023 to 1.5% in 2024 and is expected to reach 1.6% in both 2025 and 2026.
These projections could be revised in coming forecast rounds to reflect additional decisions on
defence spending.
Higher defence spending may result in a less contractionary fiscal stance in the EU until
2028 despite the planned fiscal adjustments. The Commission Spring 2025 Forecast projects
a broadly neutral fiscal stance in the EU in 2025. Without the additional defence expenditure
already included in the forecast (around 0.1% of GDP), the EU fiscal stance projected for 2025
would have been slightly contractionary. Similarly, the slightly contractionary EU fiscal stance
implied for 2026-2028 by the consistent implementation of the medium-term fiscal-structural
plans could also be offset by the use of the flexibility allowed by the activation of the national
escape clause for higher defence spending. According to the Commission’s communication (65), after
the end of this flexibility Member States would have to sustain the higher defence spending level
through gradual re-prioritisations within their national budgets, to safeguard fiscal sustainability.

(62)
Barro, R. (1990). Government Spending in a Simple Model of Endogenous Growth. Journal of Political Economy 98 (5):
102-26. Deger and Smith (1983). Military Expenditure and Growth in Less Developed Countries. Journal of Conflict
Resolution 27: 335-353. Barro, R. J. and Sala-i-Martin, X. (1992). Public Finance in Models of Economic Growth. Review
of Economic Studies 59: 645-661.
(63)
Atesoglu, H. S. and Mueller, M. J. (1990). Defence spending and economic growth. Defence Economics 2: 19-27. Ando, J.
(2018). Externality of Defense Expenditure in the United States: A New Analytical Technique to Overcome
Multicollinearity. Defence and Peace Economics 29: 794-808. Dunne, P. and Nikolaidou, E. (2012). Defence Spending
and Economic Growth in the EU15. Defence and Peace Economics 23: 537-548. Kollias, C. and Paleologou, S. M. (2016).
Investment, growth and defense expenditure in the EU15: Revisiting the nexus using SIPRI’s new consistent dataset. The
Economics of Peace and Security Journal 11: 28-37.
(64)
Landau (1996). Is one of the 'peace dividends' negative? Military expenditure and economic growth in the wealthy
OECD countries. The Quarterly Review of Economics and Finance 36(2): 183-195. Hou and Chen (2014). Military
Expenditure and Investment in OECD Countries: Revisited. Peace Economics, Peace Science and Public Policy 20(4): 621-
630. Gómez-Trueba Santamaria, P., Arahuetes Garcia, A. and Curto González, T. (2021). A tale of five stories: Defence
spending and economic growth in NATO´s countries. PLoS ONE 16(1): e0245260. (link).
(65)
“Accommodating increased defence expenditure within the Stability and Growth Pact”, C(2025) 2000 final (link).

86
PART III
Prospects by individual economy
Euro Area Member States
 1. BELGIUM

Economic activity in Belgium is expected to slow down to 0.8% in 2025, mainly due to high
global uncertainty and decreased exports. It is projected to increase slightly to 0.9% in 2026,
supported by improving external demand. Inflation is forecast to decrease to 2.8% in 2025 and
1.8% in 2026, driven by lower price pressures for industrial goods and energy. The government
deficit is projected to increase over the forecast horizon due to rising expenditure, mainly on
ageing related costs, defence and interest payments. Therefore, the government debt is also
expected to continue its increasing path.

Economic activity is set to slow down this year

The Belgian economy grew by 1% in 2024, Graph III.1.1: Belgium - Real GDP growth and contributions
mainly supported by strong private consumption
8 pps. forecast
despite weakened purchasing power. Investment
increased only moderately, and while both 6

exports and imports declined, net export had a 4

slightly positive contribution to growth. GDP 2

growth remained robust at 0.4% q-o-q in the first 0
quarter of 2025.
-2
Domestic demand is expected to slow down in -4
2025, with a further moderation anticipated in
-6
2026. Decelerating employment growth and 17 18 19 20 21 22 23 24 25 26
declining consumer sentiment are projected to Net exports Investment Priv. consumption
weigh on private consumption. Consequently, the
Gov. consumption Inventories Real GDP (y-o-y%)
saving rate is forecast to decrease only
moderately to around 12.6% of disposable
income in 2026. Investment is set to increase by 0.5% in 2025 and 1.2% 2026, respectively. While
construction is set to expand, uncertainties in the external environment are expected to hold
equipment investment back. The introduction of US tariffs is projected to adversely affect Belgian
exports, the US being Belgium's fourth largest export market, especially in the pharmaceuticals
sector (exempted from tariffs so far), machinery and equipment, and transport-related sectors.
Imports are set to decrease less than exports, resulting in a negative contribution of exports to
growth in 2025. Following a contraction in 2025 exports and imports are expected to rebound in
2026, driven by the expected mild improvement of the external environment.
Overall, the economic activity is forecast to grow by 0.8% in 2025, followed by a mild recovery of
0.9% in 2026.

Unemployment set to increase this year

Employment growth eased to 0.3% in 2024, mainly due to a further decline of employment in the
industrial sector. Although it is set to remain modest over the forecast horizon, a pick-up is
projected in 2026, notably driven by the reform of the unemployment benefit system. The
unemployment rate is set to rise to 6.1% in 2025, alongside the slowdown of economic activity,
before decreasing in 2026. Labour market participation is forecast to increase due to the rise of
the statutory retirement age. Wage growth is set to ease gradually, following the decrease in
inflation.

Gradual decrease of inflation

Headline inflation is projected to decline from 4.3% in 2024 to 2.8% in 2025. Goods inflation is set
to significantly slow down, supported by decreasing energy commodity prices and low imported
inflation. However, services inflation is projected to remain more elevated in 2025, notably driven

90
 Euro Area Member States, Belgium

by the increase in service vouchers and public transport prices. Inflationary pressures are projected
to ease further to 1.8% in 2026, with all the components registering a slower growth in prices.

Government debt to trend up on the back of high deficits

In 2024, the government budget deficit increased to 4.5% of GDP. Although the budget benefited
from the phase-out of the support measures related to the energy crisis (0.4% of GDP), high
ageing-related costs, interest payments and gross fixed capital formation pushed up the deficit.
In 2025, the deficit is forecast to increase to 5.4% of GDP. The further widening of the deficit is
due to expenditure growth, as revenue remains stable at around 50% of GDP. Primary expenditure
is projected to increase more than GDP, driven by ageing-related costs (+0.5% of GDP) and
defence (+0.4% of GDP). In addition, interest expenditure is forecast to increase further due to
higher debt and refinancing rates (0.1% of GDP). On the revenue side, taxes on income and wealth
are expected to increase (+0.2% of GDP), while taxes on production and imports are projected
slightly lower (-0.1% of GDP). The latter is mainly driven by measures adopted at the regional
government level.
In 2026, the deficit is set to continue its upward trend, reaching 5.5% of GDP. This is mainly driven
by higher interest expenditure (+0.2% of GDP) and contributions to the EU budget (+0.2% of GDP),
while the new government measures for the labour market, pensions and taxation are estimated
to have a positive impact on public finances. Revenue as a percentage of GDP is projected to
remain stable also in 2026.
General government gross debt stood at 104.7% of GDP at the end of 2024. It is projected to
increase over the forecast period, reaching 107.1% of GDP in 2025 and 109.8% in 2026. The
persistence of high general government deficits explains this upward trend.

Table III.1.1: Main features of country forecast - BELGIUM

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 614.0 100.0 1.1 6.2 4.3 1.2 1.0 0.8 0.9
Private Consumption 318.7 51.9 1.1 5.6 3.6 0.6 2.0 1.5 1.1
Public Consumption 147.8 24.1 0.9 4.2 3.4 2.9 2.6 2.2 0.6
Gross fixed capital formation 149.8 24.4 1.8 4.3 1.7 3.5 1.4 0.5 1.2
Exports (goods and services) 486.4 79.2 2.4 14.7 5.8 -7.1 -3.4 -1.8 1.9
Imports (goods and services) 486.5 79.2 2.7 12.8 5.8 -6.8 -3.5 -1.0 2.1
GNI (GDP deflator) 620.7 101.1 1.1 6.6 4.2 1.4 0.8 0.4 0.5
Contribution to GDP growth: Domestic demand 1.2 4.9 3.0 1.8 2.0 1.4 1.0
Inventories 0.0 -0.3 1.2 -0.4 -1.1 0.0 0.0
Net exports -0.1 1.6 0.1 -0.2 0.1 -0.6 -0.2
Employment 0.9 1.7 1.9 0.8 0.3 0.3 0.5
Unemployment rate (a) 7.6 6.3 5.6 5.5 5.7 6.1 5.8
Compensation of employees / head 1.9 4.9 7.5 8.0 2.9 3.6 2.2
Unit labour costs whole economy 1.7 0.5 5.1 7.5 2.2 3.2 1.9
Saving rate of households (b) 14.5 16.6 12.7 14.1 13.5 13.0 12.6
GDP deflator 1.7 2.7 6.8 4.5 1.9 2.8 2.1
Harmonised index of consumer prices 1.9 3.2 10.3 2.3 4.3 2.8 1.8
Terms of trade goods -0.1 -1.7 -5.0 1.0 0.5 1.1 0.3
Trade balance (goods) (c) 0.3 2.1 -0.2 0.5 1.3 1.4 1.5
Current-account balance (c) 1.3 1.9 -1.3 -0.6 -0.2 -0.7 -1.0
General government balance (c) -2.9 -5.4 -3.6 -4.1 -4.5 -5.4 -5.5
Fiscal stance (c) 0.2 0.2 -1.3 -0.4 -0.4 -0.4 0.3
Structural budget balance (d) -2.7 -4.6 -4.4 -4.1 -4.2 -4.8 -4.7
General government gross debt (c) 100.5 108.5 102.7 103.2 104.7 107.1 109.8
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

91
 2. GERMANY

After slightly contracting for two years in a row, economic activity is expected to broadly stagnate
in 2025. Trade tensions are set to significantly weigh on exports, though private consumption is
projected to expand slightly in 2025, boosted by increases in purchasing power and lower interest
rates. Investment is expected to stagnate this year, inhibited by tighter financing conditions and
weaker economic sentiment – both related to the elevated uncertainty. In 2026, growth is
projected to rebound to 1.1%, as domestic demand strengthens, driven by continued consumption
growth and a gradual recovery in investment. The government deficit is set to remain elevated,
and the government debt ratio is expected to increase to 64.7% of GDP in 2026.

Economic activity gradually picking up in 2026

As the new government's policy intentions to boost infrastructure and defence spending have yet
to be detailed, they are not included in this forecast. However, their positive effects of on
sentiment indicators are taken into account.
The German economy continued to face headwinds throughout 2024. Real GDP contracted by
0.2%, following a decline of 0.3% in 2023. In the second half of 2024, exports decreased by 1.7%,
compared to the same period a year before. This reflects strong losses in export market shares,
especially to China, but also the US. High uncertainty and tight financing conditions weighed on
equipment investment. Private consumption was of limited support to economic growth, as
consumer sentiment remained low, and households’ saving rate increased.
In 2025 and 2026, tariffs and increasing global Graph III.2.1: Germany - Real GDP growth and contributions
uncertainty are set to exert a drag on
5 pps. forecast
consumption, investment, and exports. Positive 4
effects of the new government’s plan to boost 3
infrastructure and defence spending were visible 2
1
in a turnaround of corporate confidence – partly 0
offsetting the adverse and uncertain external -1
environment. -2
-3
Lower inflation is set to support real household -4
incomes and underpin a moderate increase in -5
-6
consumption in 2025 and 2026. Strong public 17 18 19 20 21 22 23 24 25 26
investment growth and the expectation of looser Net exports Investment Priv. consumption
fiscal policy are projected to support a gradual
Gov. consumption Inventories Real GDP (y-o-y%)
recovery in corporates’ equipment investment.
Residential construction activity is expected to
bottom out in 2025 and start picking up, as shown by the slightly increasing building permits and
orders, as well as rising mortgage lending. In addition, public investment growth drives a
turnaround of non-residential construction already this year. Exports, however, are set to keep
weighing on growth for the third consecutive year. Tariffs and elevated uncertainty add to the
structural decline in leading export industries, and the US market will no longer provide a partial
buffer against rapidly shrinking exports towards China.
In this context, the strong increase in exports in early 2025 likely reflects a short-lived frontloading
of imports, ahead of the implementation of announced tariffs. Overall, exports are projected to
contract by 1.9% this year and recover only partially in 2026. The current account surplus is
forecast to fall to 5.1% in 2025 and 2026, as adverse developments in exports are partly
compensated by cheaper imports.
Overall, real GDP is set to stagnate in 2025 and return to growth, at 1.1%, in 2026.

92
 Euro Area Member States, Germany

Economic stagnation leaves its mark on the labour market

As output contracted, employment growth has been decelerating since 2022, with declining
employment in manufacturing largely offset by job growth in public services, education, and the
health sector. Although the labour market eased slightly, 28% of companies still reported labour
shortages in early 2025. The labour market is set to remain tight, as in a context of a rapidly aging
population, a mild contraction in employment is offset by stagnating – in 2025 – and then
decreasing – in 2026 – labour force. After increasing to 3.6% in 2025, the unemployment rate is
set to fall back to 3.3% in 2026, as employment growth picks up again. As inflation decelerates
more than nominal wage growth, real wages are set to continue to increase in the short term.

Inflation continues to abate

After subsiding to 2.5% in 2024, HICP inflation is projected to decelerate further to 2.4% in 2025
and 1.9% in 2026. Strong declines on energy wholesale markets in early 2025 herald a
deflationary impact of retail energy prices over the forecast horizon. At the same time, wage
negotiations are still bound to be driven by past inflation and influence overall wage growth. This is
set to lead to some persistency in service inflation.

Public finances strained

In 2025, the general government deficit is projected to decrease slightly to 2.7% of GDP, from
2.8% in 2024. Strong wage growth and increases in the social contribution rates for healthcare
and long-term care are set to boost income tax revenues and social contributions. Revenues are
set to grow at a similar pace as in 2024. Expenditure growth is expected to slow down compared
to 2024, but demographic ageing will likely keep social expenditures structurally elevated.
In 2026, the government deficit is projected to increase again to 2.9% of GDP, as revenue growth
slows down on the back of decelerating wage dynamics and expenditure growth remains stable.
Overall, the fiscal stance is set to turn slightly contractionary in 2025 and slightly expansionary in
2026. Government debt stood at 62.5% of GDP at the end of 2024 and is expected to increase to
63.8% in 2025 and 64.7% in 2026.

Table III.2.1: Main features of country forecast - GERMANY

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 4305.3 100.0 1.1 3.7 1.4 -0.3 -0.2 0.0 1.1
Private Consumption 2271.8 52.8 0.5 2.3 5.6 -0.4 0.3 0.7 1.1
Public Consumption 961.3 22.3 2.2 3.4 0.1 -0.1 3.5 1.9 1.3
Gross fixed capital formation 898.0 20.9 1.8 0.6 -0.2 -1.2 -2.7 0.2 2.6
Exports (goods and services) 1812.5 42.1 2.8 10.0 3.1 -0.3 -1.1 -1.9 1.1
Imports (goods and services) 1646.5 38.2 3.1 9.0 7.0 -0.6 0.2 0.9 1.5
GNI (GDP deflator) 4459.0 103.6 1.2 4.5 1.6 -0.4 -0.2 0.0 1.1
Contribution to GDP growth: Domestic demand 1.1 2.1 2.8 -0.5 0.3 0.9 1.4
Inventories 0.0 0.7 -0.1 0.1 0.0 0.2 -0.2
Net exports 0.1 0.9 -1.3 0.1 -0.6 -1.1 -0.1
Employment 0.8 0.2 1.4 0.7 0.2 -0.2 0.2
Unemployment rate (a) 5.7 3.7 3.2 3.1 3.4 3.6 3.3
Compensation of employees / head 2.1 3.2 4.3 5.8 5.2 3.4 2.9
Unit labour costs whole economy 1.8 -0.3 4.3 6.9 5.7 3.3 2.0
Saving rate of households (b) 17.4 21.9 18.9 19.3 20.1 20.0 19.9
GDP deflator 1.4 2.8 6.1 6.1 3.1 2.4 2.2
Harmonised index of consumer prices 1.5 3.2 8.7 6.0 2.5 2.4 1.9
Terms of trade goods 0.3 -3.9 -4.7 5.2 1.7 2.5 1.2
Trade balance (goods) (c) 6.7 5.1 3.4 5.6 5.7 5.3 5.3
Current-account balance (c) 6.8 7.0 4.6 6.2 6.1 5.3 5.3
General government balance (c) -0.7 -3.2 -2.1 -2.5 -2.8 -2.7 -2.9
Fiscal stance (c) -0.8 0.7 -2.3 0.3 0.0 0.4 -0.2
Structural budget balance (d) 0.5 -2.8 -2.1 -2.1 -2.1 -1.8 -2.4
General government gross debt (c) 69.8 68.1 65.0 62.9 62.5 63.8 64.7
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

93
 3. ESTONIA

The Estonian economy is set to resume growing in 2025, albeit weakly amid very high global
uncertainty and tax increases. Private consumption is projected to recover slowly. Uncertainty is
set to heavily weigh on private investment, while public investment is expected to increase.
Exports and imports are projected to contract due to the tariffs and their impact on global growth.
After growing by 1.1% in 2025, real GDP is expected to expand by 2.3% in 2026. HICP inflation is
projected at 3.8% in 2025 amid persistent services inflation and tax hikes, and at 2.3% in 2026.
The government deficit is expected at 1.4% of GDP in 2025 before increasing to 2.4% in 2026,
and the debt-to-GDP ratio is set to reach 23.8% of GDP in 2025 and 25.4% in 2026.

Growth to remain weak because of global uncertainty

Estonia’s real GDP contracted by 0.3% in 2024. In Graph III.3.1: Estonia - Real GDP growth and contributions
quarterly terms, economic activity expanded in all
10 pps. forecast
last three quarters, with real GDP growth in the 8
fourth quarter being the strongest, at 0.7%, when 6
both consumption and exports of goods 4
2
rebounded. Consumption was likely driven by 0
anticipated purchases ahead of higher taxes -2
coming into force in 2025. -4
-6
Despite higher tax rates, business and consumer -8
sentiment improved in the first few months of -10
-12
2025. Increasing real disposable incomes and 17 18 19 20 21 22 23 24 25 26
lower borrowing rates, which reduce the interest Net exports Investment Priv. consumption
burden quickly due to the prevalent use of loans
Gov. consumption Inventories Real GDP (y-o-y%)
at variable interest rates, supported consumption
and investment. However, the sharp rise in global
uncertainty following the announcements of US tariffs is set to weaken growth prospects, slowing
private consumption growth until the impact on the economy and jobs becomes clear. Investment,
which in recent years was weak due to low capacity utilisation, is set to take a further hit due to
uncertainty, as private projects are likely to be postponed or cancelled. A partially offsetting factor
is an expected increase in public investment, as some large projects, such as the Rail Baltic, are
implemented, and defence investments are expected to take place.
Exports are set to weaken. While direct exposure of the Estonian exports to the US is not very
large, the hit on Estonian exports is also expected to come from a decline in growth of the trading
partners – particularly the Nordic countries and Germany. As a result of these factors, Estonian real
GDP is projected to grow by 1.1% in 2025. With real income growing in 2026 and uncertainty
subsiding, real GDP is expected to increase by 2.3% in 2026.

Labour market remains stable

The labour market remained relatively stable, with a very high participation rate, and the
unemployment rate in early 2025 standing at 7.7%. As labour hoarding was observed in the past
years, employment is not expected to pick up despite economy turning to growth. The
unemployment rate is projected at 7.5% in both 2025 and in 2026.

Inflation remains high due to tax hikes

HICP inflation increased in early 2025 as VAT and other taxes were increased. It stood at 4.4% in
the first quarter 2025, driven by services (where the new car registration tax was recorded),
followed by processed food inflation. Going forward, inflation is expected to slow down as energy
prices are declining and others are expected to moderate. However, further tax hikes in the middle
of the year are likely to keep inflation up. Overall inflation is forecast at 3.8% in 2025 and to

94
 Euro Area Member States, Estonia

decelerate to 2.3% in 2026, as the impact of tax measures gradually dissipates and global food,
energy and non-energy industrial good price pressures weaken.

Public deficit to remain stable in 2025 and increase in 2026

In 2024 the general government deficit stood at 1.5% of GDP (down from 3.1% in 2023). Revenue
growth was supported by increases in the value added tax and environmental taxes’ rates, labour
taxation collection due to fast wage growth, and receipts of value added and corporate income
taxes due to purchases of motor vehicles and distribution of profits anticipating future tax
increases. On the expenditure side, the planned increases in defence expenditure, social benefits
and operating expenses of local governments were not fully implemented.
In 2025, the deficit is expected at 1.4% of GDP, mainly on the back of increases in revenue. These
are projected to come mainly from increased tax rates, namely on personal and corporate income
(both by 2 pps. to 22%), income for credit institutions (by 4 pps to 18%), value added (of 2 pps to
24%), and from the introduction of a motor vehicle tax. The recovery of the economy is also set to
improve the intake of these taxes. On the expenditure side, strong increases are expected in gross
fixed capital formation for defence.
In 2026 the deficit is forecast to increase to 2.4% of GDP. The net effect of additional increases in
the personal and corporate income tax rates (both by 2 pps to 24%), together with additional
excise duties on alcohol, tobacco and energy products, are likely to be mostly offset by the impact
of the increase in the personal income tax-free threshold, accounting for 1.5% of GDP. The outlook
for 2026 is rather uncertain following policy announcements by the new government coalition at
the beginning of the year, including the intention not to introduce the planned corporate income tax
rate increase and to introduce a minimum exemption to the personal income tax rate increase of
EUR 700 per month. These announcements have not been incorporated in the forecast, as coalition
negotiations are still ongoing.
Public debt is projected to increase over the forecast horizon, from 23.6% of GDP in 2024 to
25.4% in 2026, This represents an improvement with respect to previous forecasts, due to the
easing of public deficit.

Table III.3.1: Main features of country forecast - ESTONIA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 39.5 100.0 2.4 7.2 0.1 -3.0 -0.3 1.1 2.3
Private Consumption 21.1 53.4 2.8 7.1 2.9 -1.3 -0.3 1.4 2.4
Public Consumption 8.3 20.9 2.5 3.9 -1.5 0.9 0.3 1.2 2.5
Gross fixed capital formation 10.3 26.1 4.4 0.3 -8.1 7.5 -6.9 1.6 3.1
Exports (goods and services) 30.1 76.3 5.3 22.1 5.0 -9.0 -1.1 2.2 2.4
Imports (goods and services) 29.9 75.7 5.1 22.7 5.0 -6.7 0.0 2.6 2.9
GNI (GDP deflator) 38.3 96.9 2.6 6.3 -0.1 -3.8 -0.2 1.1 2.3
Contribution to GDP growth: Domestic demand 3.4 4.5 -1.2 1.4 -2.0 1.4 2.6
Inventories -0.5 3.4 1.3 -2.9 1.2 0.0 0.0
Net exports -0.1 -0.7 -0.1 -1.9 -0.9 -0.3 -0.3
Employment 0.4 0.1 4.6 3.2 0.2 -0.1 0.2
Unemployment rate (a) 8.0 6.2 5.6 6.4 7.6 7.6 7.3
Compensation of employees / head 7.3 9.3 8.2 8.2 5.6 4.5 4.0
Unit labour costs whole economy 5.2 2.1 13.1 15.1 6.1 3.3 1.9
Saving rate of households (b) 7.2 8.6 2.8 3.1 3.8 3.3 5.2
GDP deflator 4.3 5.4 15.8 8.1 3.7 3.9 2.6
Harmonised index of consumer prices 3.2 4.5 19.4 9.1 3.7 3.8 2.3
Terms of trade goods 0.2 0.6 -0.1 4.2 0.6 0.0 0.5
Trade balance (goods) (c) -6.8 -4.3 -7.8 -6.0 -6.9 -6.7 -6.4
Current-account balance (c) -2.4 -3.6 -3.9 -1.7 -2.0 -2.1 -2.0
General government balance (c) -0.3 -2.6 -1.1 -3.1 -1.5 -1.4 -2.4
Fiscal stance (c) -1.1 1.8 0.5 -1.8 1.8 1.0 -0.5
Structural budget balance (d) -1.1 -4.0 -1.3 -1.2 0.6 0.3 -1.7
General government gross debt (c) 8.9 18.4 19.1 20.2 23.6 23.8 25.4
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
Note : Contributions to GDP growth may not add up due to statistical discrepancies.

95
 4. IRELAND

Ireland’s GDP is forecast to grow by 3.4% in 2025 and 2.5% in 2026 supported by a strong
labour market. However, the high uncertainty and deterioration in global trading conditions are
expected to detract from growth. Moreover, Ireland’s deep economic ties to the US pose notable
downward risks in the context of rising protectionism. The general government balance is forecast
to remain in surplus, though significant risks arise from the uncertain outlook for corporate tax
revenues.

Continued growth amid elevated external risks

The Irish economy entered 2025 in a strong Graph III.4.1: Ireland - Real GDP growth and contributions
position. Real GDP rose by 1.2% in 2024, driven
40 pps.
by a rebound in exports, while modified domestic forecast

demand – which better reflects domestic 30

economic activity in Ireland – grew by 2.7% in 20

2024, supported by a robust labour market and 10

easing inflation. Preliminary GDP estimates 0
indicate robust growth of 3.2% q-o-q in the first -10
quarter of 2025, likely fuelled by multinationals
-20
accelerating exports ahead of potential tariffs.
-30
Steady employment and real wage growth are set 17 18 19 20 21 22 23 24 25 26

to underpin private consumption over the forecast Net exports Investment Priv. consumption

period. However, elevated uncertainty is expected Gov. consumption Inventories Real GDP (y-o-y%)
to keep household saving rates above pre-
pandemic norms, tempering the pace of consumption growth.
Investment declined sharply in 2024, largely due to intellectual property exports, while modified
investment - which excludes the volatile intangible and aircraft leasing components – recorded
modest growth. Looking ahead, modified investment is expected to remain subdued due to high
uncertainty. Headline investment figures incorporate a technical assumption that intellectual
property investment will return to levels similar to those of the past years.
Exports rebounded strongly in 2024, largely driven by multinationals, with pharmaceutical trade
surging and computer services remaining robust. While export growth is expected to continue,
momentum is expected to moderate amid the imposition of tariffs and a weak external
environment.
Overall, GDP is expected to grow by 3.4% in 2025 and 2.5% in 2026. Modified domestic demand is
set to expand by 2.2% in 2025 and 2.3% in 2026. However, Ireland’s openness and high trade and
investment links to the US leaves it vulnerable to further protectionist policies. While the current
US tariff exemptions - notably on pharmaceuticals - cover a large majority of Ireland’s goods
exports to the US, the introduction of new tariffs, along with broader US policy changes to
disincentivise investment and activity in Ireland present significant downside risks to Ireland’s
economy.

Labour market remains strong but shows signs of moderation

Employment continued to grow in 2024, supported by a growing labour supply largely driven by
high inward migration and increased participation. However, falling vacancy rates suggest a
gradual easing of labour demand pressures. Despite this, the unemployment rate remained close
to historical lows at 4.0% in the first quarter of 2025 and is expected to stay low over the forecast
horizon, due to the still tight labour market. Employment is set to continue expanding into 2025
and 2026, albeit at a more moderate pace, reflecting the expected expansion in the domestic
economy. That said, the Irish labour market remains sensitive to a potential slowdown in exports.

96
 Euro Area Member States, Ireland

Inflation expected to remain low

HICP inflation remained low in early 2025, averaging 1.6% in the first quarter. However, an uptick
in food prices, along with a slower decline in energy prices and still elevated services inflation kept
rates slightly higher than previous quarters. Looking ahead, lower prices for non-energy industrial
goods and decreases in commodity prices are expected to dampen inflation, and headline inflation
is forecast to reach 1.6% in 2025 and 1.4% in 2026.

General government balance to remain in surplus

Ireland’s general government balance registered a surplus of 4.3% of GDP in 2024. A large share
(2.6 pps.) of it was driven by a one-off revenue due to the EU Court of Justice’s ruling of 10
September 2024 concerning the taxation of two Apple group companies. Excluding this one-off
transfer, the surplus amounted to 1.7% of GDP, as buoyant current revenue growth outpaced
increases in public sector pay, investment and social transfers.
In 2025, the surplus is forecast to recede to 0.7% of GDP. Revenue growth is projected to slow
down amid heightened levels of consumer and business uncertainty, with the corporate income tax
revenue expected to experience a slight decline from its peak levels in recent years. Expenditure
growth is set to remain high in 2025 due to strong increases in public sector pay, investment and
social transfers. In 2026, as revenue growth is projected to continue at a modest rate while strong
expenditure growth is expected to continue, the budget surplus is set to recede to 0.1% of GDP.
The general government debt-to-GDP ratio is forecast to decrease from 40.9% in 2024 to 38.6%
in 2025 and to 38.2% in 2026. The debt ratio is set to fall more slowly than if the budget
surpluses were translated mechanically into debt reduction, mainly due to transfers to the Future
Ireland Fund and the Infrastructure, Climate and Nature Fund, as well as cash-accrual adjustments.
A weaker performance or a downsizing of the multinational-dominated sectors would significantly
affect tax revenues, which is a key risk to the fiscal outlook. The outlook for corporate income tax
revenues is particularly uncertain, given their concentration among a relatively small number of
large multinational companies and a large portion estimated to be windfall, i.e. beyond what is
explained by underlying domestic economic activity.

Table III.4.1: Main features of country forecast - IRELAND

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 533.4 100.0 4.6 16.3 8.6 -5.5 1.2 3.4 2.5
Private Consumption 152.1 28.5 1.3 8.9 10.8 4.2 2.3 2.4 2.3
Public Consumption 66.9 12.6 2.6 6.6 4.1 5.6 4.0 2.9 3.6
Gross fixed capital formation 91.7 17.2 8.2 -39.4 3.7 2.8 -25.4 22.4 1.4
Exports (goods and services) 787.2 147.6 8.2 14.1 13.5 -5.8 11.7 1.3 2.8
Imports (goods and services) 562.2 105.4 8.2 -8.7 16.0 1.2 6.5 3.2 2.7
GNI (GDP deflator) 404.0 75.7 3.5 13.6 4.0 5.1 0.7 0.8 0.8
Contribution to GDP growth: Domestic demand 3.4 -13.2 3.8 2.2 -4.8 4.9 1.4
Inventories 0.2 0.2 0.9 1.3 -3.0 0.0 0.0
Net exports 1.6 29.1 3.3 -9.1 9.1 -1.4 1.2
Employment 1.0 6.6 6.9 3.5 2.7 1.7 1.2
Unemployment rate (a) 9.2 6.2 4.5 4.3 4.3 4.3 4.4
Compensation of employees / head 2.5 2.9 2.5 6.8 3.5 3.4 3.3
Unit labour costs whole economy -1.0 -5.7 0.9 16.9 5.0 1.8 2.0
Saving rate of households (b) 13.0 22.5 15.1 13.6 14.2 13.6 13.4
GDP deflator 1.1 1.1 6.8 3.6 3.3 2.7 2.1
Harmonised index of consumer prices 0.8 2.4 8.1 5.2 1.3 1.6 1.4
Terms of trade goods 0.0 -9.1 -3.7 -0.3 4.0 1.8 1.0
Trade balance (goods) (c) 25.9 37.5 39.4 30.6 33.1 32.8 31.4
Current-account balance (c) -2.8 12.2 8.8 8.1 17.0 12.6 11.6
General government balance (c) -5.5 -1.4 1.7 1.5 4.3 0.7 0.1
Fiscal stance (c) 0.7 0.2 -0.1 -1.0 0.1 0.0 -0.1
Structural budget balance (d) -1.1 -4.2 -3.5 1.5 2.3 1.0 0.4
General government gross debt (c) 68.6 52.6 43.1 43.3 40.9 38.6 38.2
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

97
 5. GREECE

The Greek economy is projected to maintain its robust momentum, and expand by 2.3% in 2025
and 2.2% in 2026, thanks to sustained consumption and EU-funded investment growth. Inflation is
expected to moderate to 2.3% by 2026, with strong wage and demand developments still putting
pressures on consumer prices. Greece achieved a significant budgetary surplus in 2024, which is
set to be sustained over the forecast horizon. Helped by robust nominal GDP growth, the debt-to-
GDP ratio continues to fall and is expected to reach 140.6% in 2026.

Economy maintains momentum despite headwinds

In 2024, Greece's economy expanded by 2.3%. This was largely fuelled by private consumption,
investment and the buildup of inventories. Despite the contractionary fiscal stance, the increase in
domestic demand was strong and implied a significant rise in imports, whereas exports grew at a
slower pace. Hence, net exports weighed on economic activity.
With the progress of the recovery and resilience Graph III.5.1: Greece - Real GDP growth and contributions
plan, EU-funded investments are expected to be
10 pps. forecast
significant in 2025 and 2026. Together with
sustained robust consumption, supported by 5
steady income growth, these are expected to be
the main drivers of economic growth. Import 0

demand is set to remain strong, given the high

import content of investment. Overall, GDP -5
growth is set to continue exceeding its long-term -10
potential, with rates of 2.3% in 2025 and 2.2% in
2026. The Greek economy is expected to be only -15
17 18 19 20 21 22 23 24 25 26
mildly affected by the U.S. tariffs due to its
relatively weak direct and indirect trade links with Net exports Investment Priv. consumption

the United States. However, risks to the growth Gov. consumption Inventories Real GDP (y-o-y%)

outlook increased and are tilted to the downside,

as a persistent increase in trade and geopolitical uncertainty together with the deterioration of the
global economic outlook could weigh on Greek exports, especially tourism.

Tighter labour market and sustained wage growth

The labour market improved in recent years, and favourable momentum carried over to early 2025
as evidenced by a further decline in the unemployment rate in February to 8.6%. Following a peak
in the first quarter of 2024, vacancy rates have begun to decrease, but still indicate a tight labour
market, particularly in sectors related to tourism and those requiring high skills. Employment is set
to keep expanding, although at a slower pace as skills gaps and low labour market participation,
especially among women, limit labour supply. Against this background, real wages per employee
are set to rise further, on average by 1.3% per year over the forecast horizon. This is also
supported by recent minimum wage increases and a reduction in social security contribution.

Inflation to remain above the euro area average

Headline inflation averaged 3% in 2024, 0.6 pps. above the euro area average. Disinflation has
been constrained by accelerating services prices and the uptick in electricity prices. Looking
forward, wages are set to continue exerting upward pressure on prices. Hence, services inflation is
expected to slow down only gradually over the forecast horizon. Overall, inflation is projected at
2.8% in 2025 and 2.3% in 2026. Inflation excluding energy and food is forecast to remain higher,
at 3.5% and 2.6% in 2025 and 2026, respectively.

98
 Euro Area Member States, Greece

Stronger fiscal outlook driven by structural gains

In 2024, the general government balance significantly outperformed expectations and recorded a
surplus of 1.3% of GDP, compared to a projected deficit of 0.6% of GDP in the Autumn Forecast.
This improvement was driven by subdued growth in current expenditure, stronger-than-anticipated
direct tax revenues, and robust receipts from social security contributions, associated not only with
solid employment growth but also with measures to combat tax evasion and undeclared work,
such as the digital labour card and stricter reporting requirements for VAT returns.
In 2025, the general government surplus is expected to narrow, reaching 0.7% of GDP. On the
revenue side, the forecast reflects the higher baseline due to the stronger-than-expected revenue
performance in 2024 and accounts for the rise in the overnight stay tax in hotels, structural
measures to combat tax evasion, the extension of the digital labour card to the food and tourism
sectors, aimed at reducing undeclared work and the increase in local government fees. These
measures are expected to offset the impact of the planned 1 pp reduction in social security
contribution rate and the increase in public sector wages. On the expenditure side, the projections
incorporate a new package of measures, worth 0.5% of GDP, announced after the publication of
the 2024 fiscal outcome, including a refund of one month’s rent with income criteria, a permanent
social benefit of EUR 250 to low-income pensioners, uninsured elderly, and persons with
disabilities, and a EUR 500 million annual increase in the national investment budget.
In 2026, the general government surplus is projected to rise to 1.4% of GDP under a no-policy-
change assumption. This improvement is expected to be supported by continued growth in tax
revenues and social security contributions, which are expected to offset the rising expenditures on
pensions and public sector wages. The fiscal stance is projected to be expansionary, supported by
EU funding, both in 2025 and in 2026.
The public debt-to-GDP ratio is projected to continue to fall to 146.6% in 2025 and 140.6% in
2026. The decline is set to be driven by nominal GDP growth as well as the budget surpluses.

Table III.5.1: Main features of country forecast - GREECE

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 237.6 100.0 -1.5 8.7 5.7 2.3 2.3 2.3 2.2
Private Consumption 163.6 68.9 -0.9 5.1 8.6 1.8 2.1 1.9 1.8
Public Consumption 43.5 18.3 -0.4 1.8 0.1 2.6 -4.1 2.6 1.1
Gross fixed capital formation 36.3 15.3 -5.3 21.7 16.4 6.6 4.5 7.8 7.3
Exports (goods and services) 99.7 42.0 1.3 24.4 6.6 1.9 1.0 3.1 3.2
Imports (goods and services) 112.5 47.3 0.3 17.4 11.0 0.9 5.5 4.2 3.5
GNI (GDP deflator) 230.2 96.9 -1.5 9.0 5.1 0.4 2.3 2.6 2.5
Contribution to GDP growth: Domestic demand -1.5 6.7 8.2 2.7 1.3 3.0 2.6
Inventories 0.0 1.0 0.2 -0.8 3.2 0.0 0.0
Net exports 0.2 0.9 -2.6 0.4 -2.2 -0.7 -0.3
Employment 0.0 5.1 2.4 1.2 1.2 1.1 0.9
Unemployment rate (a) 17.6 14.7 12.5 11.1 10.1 9.3 8.7
Compensation of employees / head -0.4 1.6 1.8 3.7 6.0 3.8 3.5
Unit labour costs whole economy 1.1 -1.7 -1.4 2.5 4.9 2.6 2.1
Saving rate of households (b) 1.8 4.4 -3.5 -1.9 -2.5 -2.5 -1.8
GDP deflator 0.7 1.4 6.5 5.9 3.2 3.4 2.3
Harmonised index of consumer prices 1.4 0.6 9.3 4.2 3.0 2.8 2.3
Terms of trade goods -0.4 -0.4 5.3 3.8 2.3 0.7 0.3
Trade balance (goods) (c) -13.1 -14.4 -19.0 -14.5 -15.0 -15.0 -14.9
Current-account balance (c) -7.1 -8.3 -10.8 -8.0 -8.3 -8.2 -7.9
General government balance (c) -6.6 -7.1 -2.5 -1.4 1.3 0.7 1.4
Fiscal stance (c) -0.6 -3.1 -2.1 0.2 1.5 -0.8 -0.8
Structural budget balance (d) 4.0 -4.8 -2.5 -1.6 0.6 -0.5 -0.1
General government gross debt (c) 158.5 197.3 177.0 163.9 153.6 146.6 140.6
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

99
 6. SPAIN

Real GDP growth is expected to remain robust in 2025, reaching 2.6%, and to soften in 2026 to
2.0%. Economic activity is set to be supported by domestic demand, owing to continued strong
labour market performance upholding private consumption growth and the projected
strengthening of investment, also thanks to the implementation of the recovery and resilience
plan. Headline inflation is projected to ease to 1.9% in 2026. The general government deficit is
set to decrease to 2.8% of GDP in 2025 and 2.5% in 2026, driven by the phase-out of energy-
related support and the withdrawal of temporary measures introduced in response to the
devastating floods in Valencia. The debt-to-GDP ratio is set to decline to 100.9% in 2025 and
then to broadly stabilise in 2026.

Economic activity to remain robust

Economic activity in 2024 expanded by 3.2%, Graph III.6.1: Spain - Real GDP growth and contributions
underpinned by the strong increase of
10 pps. forecast
consumption and by the positive contribution of
net external demand. The economic expansion 5
continued in the first quarter of this year, with
GDP edging up by 0.6%. This outturn was 0

supported by investment and private consumption

-5
growth and, to a lesser extent, by net exports.
Real GDP growth is expected to attain 2.6% in -10
2025 overall, also reflecting a high carry-over
-15
from 2024, and to decelerate to 2.0% in 2026. 17 18 19 20 21 22 23 24 25 26

Domestic demand is set to remain the key driver Net exports Investment Priv. consumption

of economic growth over the forecast period, Gov. consumption Inventories Real GDP (y-o-y%)
driven by private consumption and the projected
pickup in investment, whilst - amidst rising trade tensions - the contribution from net exports is
expected to be negative in both years. Consumer spending would be upheld by further, yet
moderating, real wage gains coupled with further employment growth in a context of sustained but
decelerating inward migration. Policy uncertainty surrounding global trade and tariffs is set to
weigh on private investment growth, even if the direct exposure of the Spanish economy to the US
in terms of exports of goods and non-tourism services remains limited overall. Nonetheless, the
healthy financial position of non-financial corporations, together with the continued
implementation of the RRP, is expected to sustain the pick-up of gross fixed capital formation,
benefitting also by the lower short-term interest rates environment. On the external demand side,
the less buoyant evolution of total exports together with the recovery of import growth is expected
to lead to a marginally negative contribution of net exports to GDP growth in 2025 and 2026.
Downside risks to the outlook relate mainly to the larger than expected slowdown of economic
activity in the euro area and in Spain’s main trading partners, particularly those with a relatively
high exposure to US markets. This could generate negative spill-over effects on activity in Spain, by
further disrupting access to export markets, prompting a prolonged precautionary behaviour by the
private sector delaying corporate investment and further upholding the household saving rate
above its long-term historical average.

Dynamic labour market and declining unemployment

The robust performance of the labour market observed in 2024 continued in the first quarter of
this year. Employment growth is expected to expand by 2.1% in 2025, underpinned mainly by
continued immigration flows. The unemployment rate is projected to steadily decline to slightly
below 10% in 2026, down from 11.4% in 2024, supported by additional job creation and a
moderation in the total labour force growth compared to recent years.

100
 Euro Area Member States, Spain

Inflation to ease further over the forecast horizon

Annual HICP inflation averaged 2.9% in 2024 and is projected to continue its slowdown in 2025
driven mainly by the deceleration of energy prices, while price pressure related to services is set to
ease more gradually. Headline inflation is projected to reach 2.3% in 2025, before easing further
to 1.9% in 2026. Nominal wage growth is set to keep growing above the inflation rate in 2025,
though real wage gains are set to moderate over the forecast horizon.

Government deficit to keep decreasing

In 2024, the general government deficit diminished by 0.3 pps. to 3.2% of GDP, benefiting from
strong economic growth, favourable labour market developments and lower costs of the energy-
related measures. Tax revenues grew by 8.4%, driven by buoyant direct taxation, including
corporate tax revenues that increased by 11.5%, reflecting robust corporate profits. However, on
the expenditure side, the impact of the emergency one-off measures related to the floods in the
Valencian community added some 0.4% of GDP to the general government deficit.
In 2025, the deficit is expected to keep decreasing driven by the phase-out of the energy-related
measures and by the lower impact of the flood-related one-off measures, partly offset by an
increase in interest payments and defence expenditure. Revenues are also set to be boosted by
new tax measures approved in December 2024, including amendments to corporate income tax,
additional taxes on electronic cigarettes and other tobacco-related products and an increased tax
rate on personal incomes from financial assets. Overall, the general government deficit is
projected to decrease to 2.8%.
Based on unchanged policies, the government deficit is forecast to decline further to 2.5% of GDP
in 2026, despite slightly higher interest expenditure. This decline is driven by the expiry of the
flood-related emergency measures as well as the favourable impact of the global minimum tax
for multinational groups.
The debt-to-GDP ratio is set to keep falling and settle below 101% in 2025, thanks to nominal GDP
growth outpacing the cost of servicing debt. The ratio is set to broadly stabilise in 2026, as the
interest-growth rate differential turns less favourable.

Table III.6.1: Main features of country forecast - SPAIN

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 1591.6 100.0 0.4 6.7 6.2 2.7 3.2 2.6 2.0
Private Consumption 889.1 55.9 0.0 7.1 4.8 1.8 2.9 2.9 2.1
Public Consumption 308.6 19.4 1.8 3.6 0.6 5.2 4.1 2.3 1.6
Gross fixed capital formation 310.9 19.5 -0.6 2.6 3.3 2.1 3.0 3.4 3.1
Exports (goods and services) 593.6 37.3 1.5 13.4 14.3 2.8 3.1 2.4 2.3
Imports (goods and services) 525.4 33.0 0.3 15.0 7.7 0.3 2.4 3.2 2.8
GNI (GDP deflator) 1584.0 99.5 0.5 7.2 5.9 1.7 3.2 2.3 2.1
Contribution to GDP growth: Domestic demand 0.2 5.3 3.5 2.5 3.0 2.8 2.1
Inventories 0.0 1.6 0.4 -0.8 -0.2 0.0 0.0
Net exports 0.3 -0.3 2.3 1.0 0.3 -0.2 -0.1
Employment 0.2 2.6 3.5 3.0 2.2 2.1 1.6
Unemployment rate (a) 17.2 14.9 13.0 12.2 11.4 10.4 9.9
Compensation of employees / head 1.8 4.8 4.9 5.8 5.0 3.4 2.6
Unit labour costs whole economy 1.5 0.8 2.3 6.2 4.0 3.0 2.2
Saving rate of households (b) 8.7 14.3 9.1 12.0 13.6 13.1 12.9
GDP deflator 1.3 2.6 4.7 6.2 3.0 2.3 2.0
Harmonised index of consumer prices 1.6 3.0 8.3 3.4 2.9 2.3 1.9
Terms of trade goods 0.0 0.7 -5.6 6.8 0.4 0.4 0.1
Trade balance (goods) (c) -3.8 -1.7 -4.4 -2.3 -2.0 -2.4 -2.4
Current-account balance (c) -1.7 0.8 0.4 2.7 3.1 2.7 2.8
General government balance (c) -5.2 -6.7 -4.6 -3.5 -3.2 -2.8 -2.5
Fiscal stance (c) -0.6 -2.0 -2.2 0.3 0.3 -0.3 -0.2
Structural budget balance (d) -2.7 -4.2 -4.6 -3.8 -3.2 -3.2 -3.2
General government gross debt (c) 78.5 115.7 109.5 105.1 101.8 100.9 100.8
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

101
 7. FRANCE

Economic activity in France is expected to decelerate strongly in 2025, to 0.6%, held back by
fiscal adjustment and trade-related uncertainty. GDP growth is then projected to pick up to 1.3%
in 2026, as investment recovers and higher real wages support a further expansion in private
consumption. Inflation is projected to fall below 1% in 2025, on the back of falling energy prices.
The government deficit is forecast to decline to 5.6% in 2025 and to edge up to 5.7% of GDP in
2026. Public debt is set to increase to 118.4% of GDP by 2026, from 113% in 2023, as the
primary deficit remains sizeable.

International uncertainties to weigh on demand in 2025-26

Real GDP is expected to grow by 0.6% in 2025, Graph III.7.1: FRANCE - Real GDP growth and contributions
held back by a contractionary fiscal stance
10 pps. forecast
coupled with economic and policy uncertainty,
8
both domestic and from the global environment. 6
Net exports would detract 0.3 percentage points 4
from GDP growth in 2025, while private 2

investment is projected to be subdued, as the 0

-2
surge in uncertainty weighs on capital
-4
expenditure. Private consumption is expected to -6
be bolstered by increases in real wages, but the -8
saving rate should remain high, against the -10
17 18 19 20 21 22 23 24 25 26
background of stagnant consumer confidence.
Net exports Investment Priv. consumption
In 2026, economic activity is projected to gain
Gov. consumption Inventories Real GDP (y-o-y%)
momentum, bringing real GDP growth to 1.3%, on
the back of declining credit cost and a slightly
expansionary fiscal stance at unchanged policies. Private consumption is expected to continue
driving GDP growth thanks to further increases in real incomes while private investment is set to
rebound on the back of monetary policy easing and increased orders in the military industry.

Labour market to soften

The labour market cooled down in the second half of 2024. The unemployment rate hovered
around 7.3% until 2024-Q4, close to its lowest level since 2008, while the activity rate slightly
decreased to 74.4%, but remains 1.6 pps. above its 2019-Q4 level. Employment is expected to
decline by 0.2% in 2025, before bouncing back in 2026 (+0.5%). Subdued employment growth is
also due to less supportive labour market policies, particularly those regarding apprenticeship
schemes. As economic output rises faster than employment, productivity is set to pick up. The
unemployment rate is expected to increase to 7.9% in 2025 and to decline only marginally in
2026.

Inflation expected to fall below 1% on the back of a sharp fall in energy prices
Inflation fell to 0.8% in April 2025, from 0.9% in March and 1.8% in January, largely thanks to the
decrease in regulated electricity prices in February. Inflation is expected to remain broadly stable in
2025, due to the recent fall in energy commodity prices. Energy prices are projected to fall by
5.0% in 2025. Consumer price inflation is expected to ease to 0.9% in 2025 (after 2.3% in 2024)
before picking up slightly to 1.2% in 2026.

Government deficits to remain large and public debt on the rise

The general government deficit increased to 5.8% of GDP in 2024, from 5.4% in 2023. Although
0.4 pps. of GDP lower than projected in autumn, the 2024 deficit outturn represents a significant
slippage compared to the deficit planned in the budget law of 30 December 2023 (4.4% of GDP).

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 Euro Area Member States, France

The increase in the deficit was due to tax revenues rising well below economic activity, mainly
because of shortfalls in corporate income and stamp duty taxes, the indexation of social benefits
(pensions) to high inflation in 2023 and high public consumption and investment growth by local
governments. These deficit-increasing factors were only partially offset by the withdrawal of most
energy-related measures and by additional expenditure saving measures of 0.3% of GDP adopted
in February 2024. In turn, interest payments on public debt increased by 0.2% of GDP.
The budget law for 2025 that was eventually adopted in February incorporates sizeable fiscal
adjustment measures aimed at curbing the dynamics of public spending and collecting extra
revenues. This forecast factors in revenue-increasing measures of around 0.5% of GDP and
expenditure-decreasing measures, mainly on public consumption and social transfers, worth
almost 0.3% of GDP. The economic deceleration forecast for 2025 is set to weigh on tax revenues,
which are expected to again rise slightly below economic activity, while higher unemployment is
set to lift unemployment benefit expenditure. Interest payments on government debt are projected
to rise further by 0.3 pps, to 2.5% of GDP, pushed by the higher debt and higher interest rates on
new bond issuances. The revenue ratio is projected to increase by almost ¾% of GDP, while the
expenditure ratio is expected to rise by some ½ pps. All in all, the general government deficit in
2025 is forecast at 5.6% of GDP.
For 2026, the general government deficit is expected to creep up to 5.7% of GDP, as some revenue
measures adopted for 2025 are set to expire. The revenue-to-GDP ratio is thus projected to decline
by around 0.2 pps., while the expenditure ratio is set to remain broadly stable, with interest
payments expected to keep rising to 2.9% of GDP.
After edging up to 113% of GDP in 2024, the government debt ratio is estimated to maintain an
upward trend, increasing to 116.0% in 2025 and to 118.4% in 2026. The increases are set to be
mainly driven by high primary deficits and rising interest payments, whereas the debt-reducing
effect stemming from nominal growth is projected to moderate compared to recent years.

Table III.7.1: Main features of country forecast - FRANCE

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 2921.4 100.0 0.7 6.9 2.6 0.9 1.2 0.6 1.3
Private Consumption 1593.0 54.5 0.9 5.3 3.2 0.8 1.0 1.0 1.4
Public Consumption 709.2 24.3 1.1 6.6 2.6 0.7 2.1 1.0 1.1
Gross fixed capital formation 652.1 22.3 0.9 9.7 0.0 0.4 -1.3 -1.0 1.4
Exports (goods and services) 971.2 33.2 1.4 11.3 8.2 2.1 1.3 1.1 2.3
Imports (goods and services) 992.7 34.0 2.3 8.3 8.8 0.3 -1.2 1.3 2.1
GNI (GDP deflator) 2970.7 101.7 0.7 8.1 2.2 0.0 1.0 0.6 1.3
Contribution to GDP growth: Domestic demand 0.9 6.7 2.3 0.7 0.8 0.6 1.3
Inventories 0.0 -0.5 0.5 -0.4 -0.5 0.1 0.0
Net exports -0.2 0.7 -0.3 0.6 0.9 -0.1 0.0
Employment 0.6 2.6 2.4 1.1 0.6 -0.2 0.5
Unemployment rate (a) 9.1 7.9 7.3 7.3 7.4 7.9 7.8
Compensation of employees / head 1.6 5.0 4.8 4.2 3.2 2.5 2.0
Unit labour costs whole economy 1.5 0.8 4.6 4.3 2.6 1.8 1.1
Saving rate of households (b) 14.7 18.7 16.5 16.5 17.0 17.0 17.0
GDP deflator 1.3 1.2 3.2 5.3 2.3 1.7 1.5
Harmonised index of consumer prices 1.4 2.1 5.9 5.7 2.3 0.9 1.2
Terms of trade goods 0.2 -2.3 -3.5 1.5 0.6 1.3 0.0
Trade balance (goods) (c) -1.8 -2.7 -4.9 -2.8 -1.9 -1.7 -1.7
Current-account balance (c) -0.3 0.0 -1.9 -2.0 -0.9 -0.6 -0.6
General government balance (c) -4.5 -6.6 -4.7 -5.4 -5.8 -5.6 -5.7
Fiscal stance (c) 0.1 -2.2 -1.9 0.6 0.2 0.9 0.1
Structural budget balance (d) -3.3 -5.7 -4.8 -5.3 -5.7 -5.2 -5.6
General government gross debt (c) 88.5 112.8 111.4 109.8 113.0 116.0 118.4
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

103
 8. CROATIA

After growing by 3.9% in 2024, economic activity in Croatia is projected to expand by 3.2% in
2025 and 2.9% in 2026, driven by robust household consumption. The labour market is set to
remain tight, with the unemployment rate below 5%. Inflation is forecast to decelerate and reach
2% in 2026. After widening significantly in 2024, the general government deficit is expected to
increase further and reach 2.7% in 2025. In a context of solid nominal GDP growth, the debt-to-
GDP ratio is expected to decline to 56.3% in 2025.

Solid economic growth to continue

After growing by 3.9% in 2024, Croatia’s economy is set to decelerate gradually over the forecast
period. Croatia’s exposure to the US-tariff shock is low compared to other Member States and a
robust domestic demand is expected to provide for solid GDP growth despite heightened trade-
related uncertainty.
In 2025, GDP is forecast to expand by 3.2%. Graph III.8.1: Croatia - Real GDP growth and contributions
Growth is expected to be mainly driven by private
15 pps. forecast
consumption, underpinned by real wage and
employment growth. Investment growth is 10
projected to continue, although at a slower pace, 5
sustained by sizeable absorption of EU funds,
0
notably from the RRF. Government consumption is
set to rise with further increases in compensation -5
of public sector employees. Exports of goods are -10
forecast to continue growing at solid rates,
despite rising trade protectionism that adversely -15 17 18 19 20 21 22 23 24 25 26
affects global economic activity and demand Net exports Investment Priv. consumption
from some of Croatia’s main trading partners.
Gov. consumption Inventories Real GDP (y-o-y%)
Conversely, exports of services are expected to
increase mildly in real terms, as continued price
increases of touristic services weigh on competitiveness. With imports outpacing exports, the
contribution of net exports to growth is set to remain negative.
In 2026, economic growth is forecast to soften but still reach 2.9%. Consumption growth is set to
decelerate as wage growth moderates. Investment is projected to continue growing, although more
slowly, further supported by increased absorption of EU funds. The external sector’s contribution to
growth is set to become less negative, as exports of services gain momentum with expected
moderation in price growth of touristic services, coupled with more solid external demand growth.
Risks to this outlook include a higher-than-expected impact of uncertainty on private investment
and consumption. Stronger than anticipated wage increases could add to price pressures and hurt
exporters’ cost competitiveness. Potential supply bottlenecks in construction could delay the
absorption of EU funds.

Tight labour market but moderating wage growth

As labour shortages remain elevated, inflows of workers from non-EU countries continue. The
unemployment rate is projected to reach new lows of 4.6% in 2025 and 4.5% in 2026 as
employment continues to grow, but it is set to decelerate over the forecast horizon. As a result,
wage growth is expected to slow down, both in nominal and real terms.

Headline inflation to reach 2% in 2026

In 2025, headline inflation is projected to decline to 3.4% from 4% in 2024, as energy inflation
picks up and food and services inflation slowly decreases. With continued moderation of wage and
demand pressures, inflation is expected to decelerate more strongly and reach 2% in 2026. The

104
 Euro Area Member States, Croatia

decline is projected to be driven mainly by services and food inflation. The expected fall in
international energy commodity prices is forecast to lead only to a small decline in energy inflation
as government’s energy price measures expire in October 2025. Inflation excluding energy and
food is set to decrease from 4.8% in 2024 to 3.4% in 2025 and 2.4% in 2026.

Public deficit increases in 2025 while debt continues to adjust

In 2024, the general government deficit increased to 2.4% of GDP, from 0.8% in 2023, driven by
higher expenditure on public wages and social benefits - in particular pensions. At the same time
revenue increased due to strong nominal GDP growth and favourable labour market developments.
In 2025, the deficit is forecast to increase to 2.7% of GDP. Nominal GDP growth, wage and
employment growth are set to continue supporting revenue, with overall additional revenue
expected from the fiscal measures (extra revenue from health social contributions and the reform
of property and rental income taxation, and reduced revenue from changes to the personal income
tax rates, brackets and deductions). Capital expenditure is projected to rise as a result of EU RRF
funds while change in the indexation formula is likely to further increase pensions expenditure.
The deficit is forecasted to edge down to 2.6% of GDP in 2026. Revenue growth is supported by
GDP and employment growth, and also fiscal measures (non-indexation of PIT brackets and
deductions, phasing out health contributions exemptions for young workers and elimination of the
temporary VAT rate reduction for natural gas, heat, pellet, wood chippings and firewood). Although
investment is set to remain at a record-high nominal level—supported by the implementation of
the RRP—its growth is subdued compared to the previous year. At the same time, the introduction
of an annual supplement for pensioners is expected to further raise pension expenditures.
The debt-to-GDP ratio reached 57.6% in 2024 and is forecast to decrease further to 56.3% in
2025, in a context of sustained nominal GDP growth. In 2026, debt is expected to increase only
marginally to 56.4% of GDP due to debt-increasing stock-flow adjustments.

Table III.8.1: Main features of country forecast - CROATIA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 85.6 100.0 0.7 12.6 7.3 3.3 3.9 3.2 2.9
Private Consumption 48.7 56.9 0.4 10.7 6.9 3.0 5.6 3.8 3.4
Public Consumption 19.8 23.1 2.0 2.8 2.2 7.1 7.0 3.9 2.9
Gross fixed capital formation 20.2 23.6 0.5 4.8 10.4 10.1 9.9 4.3 3.2
Exports (goods and services) 42.6 49.7 1.6 32.7 27.0 -2.9 0.9 2.3 2.6
Imports (goods and services) 45.2 52.8 1.7 17.3 26.5 -5.3 5.3 3.8 3.3
GNI (GDP deflator) 85.9 100.4 0.8 10.3 7.4 3.5 5.1 2.6 2.9
Contribution to GDP growth: Domestic demand 0.8 8.1 6.7 5.5 6.9 4.1 3.4
Inventories 0.1 -0.6 1.1 -3.9 -0.5 0.0 0.0
Net exports -0.2 5.2 -0.5 1.7 -2.5 -0.9 -0.5
Employment 0.1 1.2 2.2 2.2 6.1 2.6 1.1
Unemployment rate (a) 11.9 7.5 6.8 6.1 5.0 4.6 4.5
Compensation of employees / head 1.7 6.1 12.3 15.9 11.2 8.8 5.3
Unit labour costs whole economy 1.1 -4.7 7.0 14.6 13.5 8.2 3.5
Saving rate of households (b) 8.0 10.6 6.4 10.2 : : :
GDP deflator 1.9 2.1 8.0 11.7 5.5 4.3 2.6
Harmonised index of consumer prices 1.8 2.7 10.7 8.4 4.0 3.4 2.0
Terms of trade goods -0.2 -0.5 -3.3 2.0 -0.1 0.4 0.2
Trade balance (goods) (c) -17.2 -19.5 -26.8 -21.8 -20.4 -19.4 -19.1
Current-account balance (c) -2.4 0.4 -3.4 0.8 -0.7 -1.1 -1.1
General government balance (c) -3.6 -2.6 0.1 -0.8 -2.4 -2.7 -2.6
Fiscal stance (c) -1.0 -0.3 -0.4 -2.5 -1.8 -0.8 0.2
Structural budget balance (d) -1.6 -2.6 -1.1 -1.9 -3.3 -3.3 -2.9
General government gross debt (c) 63.9 78.2 68.5 61.8 57.6 56.3 56.4
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

105
 9. ITALY

Real GDP growth is expected to remain stable at 0.7% in 2025 and to rise to 0.9% in 2026. The
economic expansion is set to be supported by domestic demand, in particular investment fuelled
by RRF-related spending. Inflation is forecast to remain below 2% in both 2025 and 2026, on the
back of negative import price dynamics and moderate domestic costs increases. The government
deficit is projected to continue falling from 3.4% of GDP in 2024 to 3.3% in 2025 and 2.9% in
2026. By contrast, the debt ratio is set to rise over the forecast horizon, driven by the lagged
impact of housing renovation tax credits accrued in the deficit until 2023.

Resilient domestic demand props up output growth

In 2024, real GDP growth stabilised at 0.7%, with Graph III.9.1: Italy - Real GDP growth and contributions
a moderate expansion in domestic demand and a
10 pps. forecast
robust contribution of net exports. Household
8
consumption increased by just 0.4%, as the 6
recovery in real disposable income was partly 4
absorbed by a rise in the saving rate. Investment 2

rose by 0.5%, with a surge in non-residential 0

-2
construction — largely supported by the RRF —
-4
more than compensating for declines in -6
equipment and housing investment. The fall in -8
imports, together with the strong expansion of -10
17 18 19 20 21 22 23 24 25 26
service exports, led to a positive contribution of
net exports to GDP growth. Net exports Investment Priv. consumption

Gov. consumption Inventories Real GDP (y-o-y%)

Real GDP growth is forecast to settle at 0.7% in
2025. While domestic demand is expected to
accelerate in 2025, US trade tariffs are set to affect exports of goods, while imports are still
expected to expand on the back of strengthening domestic demand. Private consumption is
anticipated to increase by 1.2%, broadly in line with real disposable income, fuelled by
employment growth and recovering real wages. Gross fixed capital formation is set to pick up, with
equipment investment recovering from the slump of 2024, as the gradual pass-through of
monetary easing lowers financing costs. The rebound is nevertheless projected to be smaller than
expected in the autumn, as increased uncertainty has reduced corporate confidence while the
adverse and volatile market response to the trade tensions is set to have a tightening impact on
broader financing conditions. Moreover, RRF grants are meant to support a further expansion in
non-residential construction, implying that the national fiscal stance will be broadly neutral despite
the ongoing fiscal adjustment. At the same time, the withdrawal of housing renovation incentives
in 2024 is set to result in a deep annual contraction of residential investment.
In 2026, real GDP growth is expected to pick up to 0.9%. While private consumption is forecast to
continue growing apace, investment is set to accelerate thanks to a further expansion in
infrastructure construction and a lower drag from the housing component. Net foreign trade is
expected to subtract further from GDP growth, as the full adverse impact of US tariffs is going to
be displayed in 2026, although somewhat reduced by trade diversion to other export markets.

Slower job and wage growth

Employment is forecast to continue growing though at a slowing pace over 2025-26. The number
of private sector employees, particularly with open-ended contracts, is still set to increase more
rapidly than that of the self-employed. The unemployment rate is expected to fall further, as the
labour force expands less than total employment, in the context of a falling working-age
population. Wage growth is expected to moderate this year and in 2026, reflecting low inflation
expectations and the need to maintain competitiveness in a more challenging trade environment.

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 Euro Area Member States, Italy

Low inflation driven by falling import prices

The drop in energy prices and the euro appreciation exert strong downward pressure on headline
inflation, keeping the 2025 annual rate below 2%. In 2026, wage restraint, increasing productivity
and further falling energy prices are forecast to push inflation down to 1.5%.

Government debt ratio to rise despite primary surpluses

The general government deficit declined by 3.8 pps. to 3.4% of GDP in 2024, as a result of the
phase-out of sizeable tax credits for housing renovations and support measures related to the
energy crisis, together with buoyant revenues, particularly from taxes on personal income and
financial assets. Public investment surged, driven also by RRF-financed projects. Primary current
expenditure increased slightly, driven by the indexation of pensions to the high 2023 inflation and
higher public-sector wages. The primary balance turned positive, from -3.6% in 2023 to 0.4% in
2024. At the same time, debt servicing costs increased by 0.2 pps., reaching 3.9% of GDP.
In 2025, the deficit is forecast to edge down to 3.3% of GDP, on the back of a marginal
improvement in the primary surplus and unchanged interest expenditure as a share of GDP. The
tax burden is expected to rise marginally, by 0.1 pps. of GDP, also due to the replacement of the
2024 tax wedge cut with a new bonus for low- and medium-income households and a new income
tax credit, together with changes to ceilings and timing for specific deductions for financial
institutions and insurance companies. Public wages are expected to grow moderately despite the
additional funds allocated to the renewal of 2025-27 public sector wage contracts. The pick-up in
RRF-financed projects is expected to drive the increase of capital expenditure.
In 2026, the deficit is expected to fall to 2.9% of GDP and the primary surplus to attain 1.1% of
GDP on the back of moderate primary expenditure growth, while interest expenditure is projected
to rise slightly to 4% of GDP.
The general government debt increased to 135.3% of GDP in 2024, from 134.6% the previous
year mainly due to a debt-increasing stock-flow adjustment related to the lagged impact on cash
borrowing of the tax credits for housing renovations, affecting previous years’ deficits. In 2025-26
the debt ratio is set to keep rising to 138.2%, driven by further debt-increasing stock-flow
adjustments and interest-growth-rate differential.

Table III.9.1: Main features of country forecast – ITALY

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 2192.2 100.0 -0.6 8.9 4.8 0.7 0.7 0.7 0.9
Private Consumption 1251.2 57.1 -0.6 5.8 5.3 0.4 0.4 1.2 1.1
Public Consumption 400.7 18.3 -0.2 2.3 0.8 0.6 1.1 0.9 0.9
Gross fixed capital formation 481.5 22.0 -1.4 21.5 7.4 9.0 0.5 0.8 1.5
Exports (goods and services) 717.6 32.7 0.9 14.1 9.9 0.2 0.4 0.9 1.7
Imports (goods and services) 667.4 30.4 0.4 16.0 12.9 -1.6 -0.7 1.7 2.4
GNI (GDP deflator) 2178.2 99.4 -0.5 8.8 4.6 -0.7 0.6 0.7 1.0
Contribution to GDP growth: Domestic demand -0.7 7.8 4.7 2.3 0.5 1.0 1.1
Inventories 0.0 1.1 0.8 -2.3 -0.2 -0.1 0.0
Net exports 0.2 0.0 -0.7 0.7 0.4 -0.2 -0.2
Employment 0.2 1.0 1.9 1.9 1.6 0.9 0.3
Unemployment rate (a) 9.6 9.5 8.1 7.7 6.5 5.9 5.9
Compensation of employees / head 0.9 6.8 3.7 2.9 3.4 3.4 2.5
Unit labour costs whole economy 1.6 -1.0 0.9 4.2 4.3 3.6 1.9
Saving rate of households (b) 12.9 15.8 11.4 11.2 11.8 11.8 11.7
GDP deflator 1.5 1.3 3.5 5.9 2.1 2.2 1.7
Harmonised index of consumer prices 1.4 1.9 8.7 5.9 1.1 1.8 1.5
Terms of trade goods 0.2 -6.1 -10.2 10.8 3.0 2.5 1.4
Trade balance (goods) (c) 1.4 2.5 -1.3 1.7 2.6 2.8 3.0
Current-account balance (c) 0.2 2.1 -1.7 0.1 0.9 1.3 1.6
General government balance (c) -3.3 -8.9 -8.1 -7.2 -3.4 -3.3 -2.9
Fiscal stance (c) -0.1 -4.4 -3.5 -0.3 3.2 0.2 0.1
Structural budget balance (d) -1.6 -8.4 -9.4 -8.4 -4.1 -3.7 -3.4
General government gross debt (c) 124.6 145.8 138.3 134.6 135.3 136.7 138.2
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

107
 10. CYPRUS

Economic growth is expected to remain strong in 2025 and 2026, thanks to the continuation of
dynamic domestic demand. Despite a fragile international environment, exports of services are
also set to remain robust. Inflation is expected to decline. The government budget is forecast to
register noticeable surpluses, supported by continued strong growth in revenues. The debt-to-GDP
ratio continues to decrease and is projected to move below 60% this year.

Robust economic growth to continue

Real GDP grew by 3.4% in 2024, mainly driven by private consumption, which increased by 3.8%.
Investment also picked up, growing by 2.5% (excluding ship registrations), despite a slowdown in
the fourth quarter linked to a strike in the construction sector. Net exports turned positive,
supported by strong surpluses in ICT, tourism and sea transport services.
Growth is set to remain robust at 3% in 2025 and Graph III.10.1: Cyprus - Real GDP growth and contributions
2.5% in 2026. Private consumption is expected to
14 pps. forecast
remain the key driver of growth as household 12
purchasing power continues to increase, in 10
conjunction with solid wage growth and abating 8
6
inflation. Net exports are also projected to remain 4
strong thanks to services sectors such as tourism 2

and ICT. Investment is set to accelerate, 0

-2
supported by funds from the RRF and the -4
continuation of large construction projects. -6
-8
The ongoing transformation of the economy is 17 18 19 20 21 22 23 24 25 26

expected to translate into strong investment Net exports Investment Priv. consumption

flows into emerging sectors such as ICT, which Gov. consumption Inventories Real GDP (y-o-y%)
also contribute to productivity gains. However, the
growing presence of foreign-owned companies, and the resulting repatriation of their profits, is
expected to partially offset improvements in the trade balance. Still, the current account deficit is
projected to narrow to 5.9% of GDP by 2026.
Economic uncertainty remains the main downside risk. Cyprus’s limited goods trade with the US
suggests only marginal direct impact from the recent tariffs. However, indirect negative spillovers
resulting from global trade disruptions remain a risk. This is particularly the case given the
importance of the sea transport sector for the Cypriot economy, which is more exposed to
international trade fluctuations.

Labour market pressures weaken

The unemployment rate fell to a 15-year low of 4.7% in 2024-Q4, without significant signs of
unmet labour demand. This is partly due to the inflows of foreign workers following the so-called
‘headquartering policies’, designed to attract international companies and relocate headquarters to
Cyprus. These inflows are expected to gradually reduce, as the initial wave of corporate interest
has largely materialised. With growth moderating slowly and labour needs diminishing as a result,
pressure on the labour market is expected to remain limited.

Inflation to hit 2%.

Food and tourism prices showed marked increases in early 2025, reflecting the delayed
passthrough of wage growth and strong tourist demand. These temporary inflationary pressures
are expected to gradually subside as wage growth normalises and goods prices, including energy,
moderate. HICP inflation is projected to converge to 2% by 2026.

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 Euro Area Member States, Cyprus

Fiscal outlook remains bright

In 2024, Cyprus reached a general government headline surplus of 4.3% of GDP, with revenues
growing stronger than expenditures. In 2025, the government surplus is projected to remain solid
and reach 3.5% of GDP. Continued strong economic growth is expected to contribute to revenues
growing at a faster pace than expenditures, despite several new or increasing expenditure
measures. These include the participation of the State in the construction of a terminal for
receiving liquified natural gas and of the Great Sea Interconnector for gas. These also include
social initiatives like the solidarity fund to compensate people who lost their savings during the
financial crisis of 2012-2013, as well as a mortgage-to-rent scheme that allows overindebted
households to stay in their property while transforming their loan into rent payments.
In 2026, the overall picture is forecast to remain broadly unchanged, and the government headline
balance is projected to achieve a surplus of 3.4% of GDP.
The government debt-to-GDP ratio dropped by more than 8 pps. down to 65.3% at the end of
2024. This trend is supported by the continued government headline surpluses. Government debt is
projected to fall to 58.0% of GDP by the end of 2025 and to 51.9% in 2026. With this fiscal
outlook the risks for public finances appear contained.

Table III.10.1: Main features of country forecast - CYPRUS

2024 Annual percentage change

mio EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 33567.7 100.0 1.9 11.4 7.2 2.8 3.4 3.0 2.5
Private Consumption 19764.6 58.9 1.8 4.7 9.8 5.9 3.8 2.5 2.2
Public Consumption 6241.8 18.6 2.6 8.9 4.7 1.2 1.5 3.7 2.5
Gross fixed capital formation 6887.2 20.5 1.9 1.9 10.8 10.7 0.1 3.5 3.0
Exports (goods and services) 32457.1 96.7 4.3 27.2 27.1 -2.8 5.3 3.7 3.5
Imports (goods and services) 31254.0 93.1 4.2 19.6 29.7 -0.7 2.4 3.6 3.5
GNI (GDP deflator) 30394.2 90.5 2.5 8.8 8.3 0.9 3.6 3.0 2.6
Contribution to GDP growth: Domestic demand 2.1 5.0 8.5 5.8 2.6 2.8 2.3
Inventories -0.1 0.6 -0.4 -0.8 -2.0 0.0 0.0
Net exports 0.0 5.8 -0.9 -2.2 2.8 0.2 0.2
Employment 1.5 2.9 4.0 1.4 2.0 1.3 1.1
Unemployment rate (a) 9.0 7.2 6.3 5.8 4.9 4.7 4.6
Compensation of employees / head 1.5 4.6 7.3 5.0 4.5 3.6 3.3
Unit labour costs whole economy 1.1 -3.4 4.1 3.7 3.1 1.9 1.9
Saving rate of households (b) 6.0 15.0 12.3 9.9 10.0 11.0 11.9
GDP deflator 1.1 3.0 6.7 3.8 3.5 2.6 2.3
Harmonised index of consumer prices 1.1 2.3 8.1 3.9 2.3 2.0 2.0
Terms of trade goods 0.3 -0.3 -2.1 1.1 0.5 -0.6 -0.2
Trade balance (goods) (c) -22.1 -16.9 -19.7 -23.7 -20.4 -19.9 -19.7
Current-account balance (c) -8.4 -5.4 -5.4 -9.5 -7.0 -6.5 -5.9
General government balance (c) -3.2 -1.6 2.7 1.7 4.3 3.5 3.4
Fiscal stance (c) -0.4 0.2 1.3 -2.7 1.9 -1.1 0.6
Structural budget balance (d) 1.8 -2.6 0.3 0.1 2.9 2.4 2.6
General government gross debt (c) 83.5 96.5 81.1 73.6 65.0 58.0 51.9
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

109
 11. LATVIA

Latvia’s GDP growth is expected to remain weak in 2025. Private consumption is set to slowly
accelerate driven by wage growth, whereas government consumption is projected to remain
strong. The economy is forecast to pick up in 2026 driven by private consumption and
investments, with GDP growth reaching 2%. After a strong decline in 2024, inflation is set to
rebound as the deflationary impact from energy prices fades away while services and processed
food inflation remains strong. Inflation is expected to increase from 1.4% in 2024 to 3% in 2025,
before falling to 1.7% in 2026. After an increase in 2024, unemployment is projected to decrease
slightly in 2025 and further in 2026. The general government deficit is forecast to increase to
3.1% of GDP in 2025 driven by weaker revenue growth and increasing current expenditure and
remain at 3.1% of GDP in 2026.

Private and public consumption set to drive growth in 2025 and 2026
In 2024, real GDP fell by 0.4%. This was mostly due to the adverse geopolitical context and
increasing uncertainty weighing on consumption and especially investment. Supported by strong
wage growth, private consumption recovered from its contraction in 2023 but remained weak
(0.5%). Private investments were also hampered by high financing costs while public investments,
in particular EU co-financed programmes, faced delays. As a result, after solid growth in 2023
(9.9%), investment significantly declined in 2024 (-6.7%). Goods and services export growth was
negative in 2024 due to a weak external environment and a deterioration in cost competitiveness.
Strong growth of public consumption provided support to the economy.
In 2025, the economy is expected to recover Graph III.11.1: Latvia - Real GDP growth and contributions
slowly from the 2024 contraction. Real disposable
12 pps. forecast
incomes and private consumption are set to
10
benefit from solid wage growth and the expected 8
increase in disposable income due to the tax 6
reform. However, increasing uncertainty amid a 4
challenging geopolitical context is set to 2
encourage precautionary savings. After a sharp 0

increase in 2024, the savings rate is thus -2

projected to remain at 7.5%. Investments are -4
expected to recover due to EU fund inflows and -6 17 18 19 20 21 22 23 24 25 26
increasing spending on defence. However, due to
Net exports Investment Priv. consumption
a strong negative carry-over and persistent
Gov. consumption Inventories Real GDP (y-o-y%)
uncertainties, investments are set to decrease by
1.2% in 2025 before recovering in 2026 (2.6%).
Public consumption is set to remain strong. After two years of decline, exports are set to recover
this year, but only gradually due to the adverse impact of US tariffs that weigh on Latvia's main
trading partners. Overall, real GDP growth is projected to reach 0.5% in 2025, before picking up
further to 2% in 2026.

Labour market expected to remain tight

As the economy slightly contracted in 2024, the unemployment rate increased to 6.9%. With a
slow recovery expected in 2025, the unemployment rate is forecast to edge down to 6.8% in 2025
and decrease further in 2026 on the back of increasing labour demand. After having reached 7.7%
in 2024 in nominal terms, growth of compensation per employee is set to stay strong in 2025 at
5.5% and in 2026 at 4.5%, supported by increases in the minimum wage and in public wages, and
driven by labour market tightness.

110
 Euro Area Member States, Latvia

Inflation set to increase

In 2024, energy prices declined fast, fuelling a rapid decrease of HICP inflation, which reached
1.4%. However, inflation surged in the last months of the year due to high inflation in the services
and food (both processed and unprocessed) component. In the last quarter of 2024, inflation
increased to 2.6%. As services’ inflation is expected to remain strong, driven by wage growth,
inflation is set to reach 3% in 2025 and 1.7% in 2026. Although services and processed food
prices are set to moderate in 2026, headline inflation excluding energy and unprocessed food is
expected to remain above HICP inflation in 2025 and 2026.

Deficit to increase over forecast horizon

In 2024, the general government deficit stood at 1.8% of GDP, down from 2.4% of GDP in 2023.
The reduction in the deficit was mainly due to the strong growth of tax revenue, which exceeded
GDP growth. The introduction of corporate income tax advance payments from the financial sector,
increases in several excise duties, and additional dividend payments from state-owned companies
contributed to the increase in revenue. The lower growth of general government expenditure in
2024 was driven by the phase-out of measures to mitigate the impact of high energy prices.
In 2025, the government deficit is forecast to increase to 3.1% of GDP. Revenues are expected to
be negatively affected by a reduction in income tax revenue, due to the reform of the personal
income tax system, and a decline in property income, primarily due to the normalisation of
profitability of state-owned companies in the energy and forestry sectors, as a result of lower
energy prices. On the expenditure side, growth of compensation of employees, interest payments
and social transfers are the main factors behind the increase in deficit.
In 2026, the government deficit is forecast to remain at 3.1% of GDP. Both revenue and
expenditure are expected to grow at a rate below that of nominal GDP. Revenue growth is expected
to be subdued due to a projected further downward adjustment in property income, as well as
lower current transfers. The expected increase of defence investment is offset by a reduction in
current expenditure while other capital expenditure provides a slight deficit-reducing contribution.
The debt-to-GDP ratio reached 46.8% in 2024 and is forecast to increase to 48.6% in 2025 and
further to 49.3% in 2026, as a result of stock-flow adjustments and budget deficits.

Table III.11.1: Main features of country forecast - LATVIA

2024 Annual percentage change

mio EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 40208.4 100.0 2.1 6.9 1.8 2.9 -0.4 0.5 2.0
Private Consumption 24104.5 59.9 2.1 8.1 5.1 -1.0 0.5 1.0 1.9
Public Consumption 8629.1 21.5 1.3 3.7 2.4 7.0 7.6 1.7 1.5
Gross fixed capital formation 9288.7 23.1 0.9 6.8 -1.6 9.9 -6.7 -1.2 2.6
Exports (goods and services) 25983.4 64.6 5.6 9.1 11.4 -4.7 -1.6 1.8 2.0
Imports (goods and services) 27012.8 67.2 4.0 15.1 9.9 -2.0 -2.3 2.1 2.1
GNI (GDP deflator) 39225.1 97.6 2.3 4.9 1.9 2.2 -0.5 -0.1 1.5
Contribution to GDP growth: Domestic demand 2.3 6.8 3.0 3.1 0.2 0.7 2.0
Inventories 0.0 3.7 -1.9 1.7 -1.2 0.0 0.0
Net exports 0.0 -3.6 0.7 -2.0 0.6 -0.2 -0.1
Employment -0.3 -1.3 0.2 0.1 -0.9 -0.4 -0.4
Unemployment rate (a) 10.8 7.6 6.9 6.5 6.9 6.8 6.6
Compensation of employees / head 8.5 7.6 13.1 15.6 9.1 5.5 4.5
Unit labour costs whole economy 6.0 -0.7 11.3 12.5 8.5 4.6 2.1
Saving rate of households (b) 5.0 10.4 3.1 5.4 7.5 7.5 7.7
GDP deflator 4.3 3.3 9.8 6.0 2.6 3.9 2.8
Harmonised index of consumer prices 3.5 3.2 17.2 9.1 1.3 3.0 1.7
Terms of trade goods 1.1 0.2 -3.3 2.9 0.9 0.1 1.3
Trade balance (goods) (c) -13.2 -8.6 -11.4 -9.3 -8.2 -8.5 -7.9
Current-account balance (c) -4.0 -4.1 -5.5 -3.9 -3.3 -3.9 -3.5
General government balance (c) -2.6 -7.2 -4.9 -2.4 -1.8 -3.1 -3.1
Fiscal stance (c) -0.6 -1.3 -1.6 -1.2 0.0 -1.1 -0.3
Structural budget balance (d) -1.6 -7.3 -4.8 -2.6 -1.6 -2.6 -2.9
General government gross debt (c) 34.6 45.9 44.4 44.6 46.8 48.6 49.3
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

111
 12. LITHUANIA

Lithuania’s economy is expected to continue growing over the forecast horizon, supported by
robust private consumption, a modest recovery in investment, and buoyant exports. However,
global trade tensions and uncertainty, in addition to the adverse geopolitical context, are set to
have a limiting effect on goods exports, consumption, investments and prices. Real GDP is
expected to grow by 2.8%. in 2025 and pick up to 3.1% in 2026. Inflation is expected to rise to
2.6% in 2025 driven by an increase in energy and food prices in the early months of the year but
ease to 1.2% in 2026, supported by lower commodity prices. The general government deficit is
projected to increase from 1.3% in 2024 to 2.3% in 2025 and to stay constant in 2026.

Economic activity to continue growing despite some limiting factors

Consumption and investment developments at Graph III.12.1: Lithuania - Real GDP growth and contributions
the end of 2024 had a large positive effect in
8 pps. forecast
2024, leading to 2.8% growth, and a positive
carry-over effect into 2025. 6

4
In 2025 and 2026, continued real wage growth is
2
supporting private consumption, although
geopolitical uncertainty and an increase in excise 0

duties from the beginning of 2025 somewhat -2

reduce expected consumption growth. The savings -4
rate is set to continue its increase to historically
-6
high rates of around 12-13% of disposable 17 18 19 20 21 22 23 24 25 26
income, while investment is projected to recover, Net exports Investment Priv. consumption
given investments supported by the RRF and in
Gov. consumption Inventories Real GDP (y-o-y%)
defence. Nevertheless, the climate of high
uncertainty is likely to limit the growth in private
investment, especially during 2025, leading to 3.5% and 4% growth of total investment over the
forecast horizon. Goods exports are expected to return to growth, despite tariff developments are
expected to weigh on the growth of exports in goods as Lithuania’s direct exposure to the US
remains limited (around 5 of total exports in 2024) and Lithuania remains competitive with its
main trading partners. As services remain robust and goods recover given improvements in export
markets and resilient non-cost competitiveness, total exports are set to grow between 3% and
3.5% in 2025 and 2026. On the other hand, strong consumption is expected to imply that imports
continue to slightly outpace exports.

Labour market set to gradually tighten again

The growth in the labour force between 2022 and 2024, in large part attributable to the inflow of
persons fleeing from Ukraine, is likely to cease in 2025 and 2026, as natural population decline
resumes in 2026. As economic activity continues to grow, the unemployment rate is expected to
gradually decrease to 6.8% in 2025 and 6.6% in 2026. The persistence of labour and skills
mismatches is expected to support continued wage growth at around 7.5% in 2025 and gradually
decelerating close to 7% in 2026. A slower pace is expected compared to previous years given
lower inflation rates and recently high wage gains.

Inflation expected to pick up but remain limited by trade and oil price developments
HICP inflation is expected to increase to 2.6% in 2025 following a jump in energy and food prices
in the early months of the year, increased excise duties on petrol, alcohol and cigarettes, and
sustained by continued services inflation. However, commodity prices are set to decline in 2025, as
oil prices counteract increasing gas and electricity prices, and recover very slowly at the end of
2026. The rest of the components of HICP are set to increase only gradually in 2026 and services
price inflation is expected to progressively slow over the horizon to around 4% by the end of 2026,

112
 Euro Area Member States, Lithuania

following the normalisation of wage growth. The additional impact of trade tensions is set to bring
HICP down to 1.2% in 2026.

General government deficit set to increase

In 2024, the general government deficit increased moderately to 1.3% of GDP (from 0.7% in
2023), due to increases in public wages, interest expenditure and social spending, as well as
intermediate consumption expenditure increases related to carry over of projects and expenditure
initially planned for 2023.
In 2025, the deficit is projected to continue to increase to 2.3% of GDP, driven by rising general
government expenditure (by 2.1 pps. of GDP), while revenue is expected to increase at a slower
pace (by 1.1 pps. of GDP). The main contributor to the rising deficit is the increase in expenditure
related to the social benefits (pensions included), which is projected to rise by 1.0 pps. of GDP,
mainly due to the annual indexation of public pensions as well as an increase in the ‘minimum
consumption basket’, to which many social benefits are associated. An increase in public
investments (0.7 pps. of GDP, out of which 0.3 pps. is driven by the projected increase in defence
investments), intermediate consumption (0.3 pps. of GDP), public wages (0.2 pps. of GDP), and
interest expenditure (0.2 pps. of GDP) are the other major contributors to higher expenditure.
General government revenue is forecast to increase mainly due to the increase in VAT and excise
duties for polluting fuels as well as increasing revenues from the social security contributions, but
the projected increase is not expected to cover for the higher expenditure.
The deficit is expected to remain constant at 2.3% of GDP in 2026. The general government
expenditure is projected to increase by 0.3 pps of GDP in comparison to 2025, which is expected to
be almost fully matched by the projected revenue increase of 0.2 pps of GDP.
In 2024, public debt increased to 38.2% of GDP. In 2025 and 2026, the debt-to-GDP ratio is
projected to increase further, reaching 41.2% and 43.9%, respectively, due to the rising deficit in
2025 and high stock flow adjustments in 2025 and 2026 which are needed mostly to compensate
the significant deficits in the state budget as the surpluses in the Social Security Fund cannot be
used for this purpose.

Table III.12.1: Main features of country forecast - LITHUANIA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 78.4 100.0 3.1 6.4 2.5 0.3 2.8 2.8 3.1
Private Consumption 43.6 55.6 2.5 8.1 2.0 -0.3 3.5 4.2 4.0
Public Consumption 14.7 18.8 0.2 1.2 1.2 -0.2 1.4 0.3 0.2
Gross fixed capital formation 17.6 22.5 3.9 12.6 5.2 9.3 -1.3 3.5 4.0
Exports (goods and services) 58.1 74.1 7.1 16.6 12.4 -3.4 2.1 3.0 3.3
Imports (goods and services) 54.1 68.9 5.6 19.2 12.7 -5.3 2.4 3.9 3.7
GNI (GDP deflator) 76.2 97.1 3.1 5.6 1.9 1.3 3.0 2.9 3.1
Contribution to GDP growth: Domestic demand 2.7 7.4 2.5 1.9 1.9 3.2 3.2
Inventories -0.1 -0.9 -0.3 -3.3 1.0 0.0 0.0
Net exports 0.7 -0.1 0.3 1.8 -0.2 -0.4 -0.1
Employment -0.2 1.3 4.9 1.4 1.7 0.4 0.3
Unemployment rate (a) 9.5 7.1 6.0 6.9 7.1 6.8 6.6
Compensation of employees / head 7.3 11.8 11.6 11.9 9.1 7.6 7.2
Unit labour costs whole economy 3.8 6.5 14.2 13.1 8.0 5.0 4.3
Saving rate of households (b) 0.2 10.1 4.7 6.8 11.4 12.8 14.1
GDP deflator 3.3 6.0 16.1 9.0 3.4 3.6 2.4
Harmonised index of consumer prices 2.9 4.6 18.9 8.7 0.9 2.6 1.2
Terms of trade goods 0.3 -6.4 -11.1 5.4 2.9 0.1 0.3
Trade balance (goods) (c) -6.6 -5.1 -10.9 -6.2 -6.0 -6.7 -6.9
Current-account balance (c) -2.3 1.4 -6.1 1.1 2.6 2.0 1.9
General government balance (c) -2.5 -1.2 -0.7 -0.7 -1.3 -2.3 -2.3
Fiscal stance (c) -1.3 2.4 0.8 0.0 -1.6 -1.7 0.0
Structural budget balance (d) -1.8 -1.9 -1.3 0.0 -0.6 -1.6 -2.0
General government gross debt (c) 32.7 43.3 38.1 37.3 38.2 41.2 43.9
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

113
 13. LUXEMBOURG

After expanding to 1% in 2024, real GDP growth in Luxembourg is projected to pick up to 1.7% in
2025 and 2.0% in 2026. Growth is expected to be mainly supported by domestic demand in 2025
while the contribution from net exports is due to turn positive only in 2026. Headline inflation is
set to decelerate thanks to a gradual reduction of energy inflation. Windfall revenues led to a
substantial surplus of the general government balance in 2024, which is expected to turn to a
deficit in 2025.

Growth to slightly rebound in 2025

Real GDP expanded by 1% in 2024 thanks mainly Graph III.13.1: Luxembourg - Real GDP growth and
to a positive contribution of net exports while contributions
investment decreased significantly following a 8 pps. forecast
fall in construction projects (both dwellings and
6
non-residential) and equipment acquisitions. In
terms of real gross value added, the human 4

health and social work activities together with 2

public administration sectors contributed the 0

most to growth while the construction, financial -2
and insurance activities sectors contributed
-4
negatively.
-6
In 2025 and 2026, economic growth is expected 17 18 19 20 21 22 23 24 25 26

to accelerate, as the fallout from trade Net exports Investment Priv. consumption
restrictions initiated by the hike in US tariffs is Gov. consumption Inventories Real GDP (y-o-y%)
foreseen to be more than compensated by the
recovery of investment. The consumer confidence indicator points towards a mild recovery in
consumption supported by an expansionary fiscal stance and falling interest rates, which underpin
investment. A wage indexation that occurred in May 2025 should further support private demand,
while the recent increase in the number of transactions in both new and existing construction and
in mortgage demand indicate a recovery in investment in dwellings which is set to further
accelerate in 2026. Credit to companies is projected to pick up from the current low level,
benefiting both from lower short-term interest rates and from the realisation of delayed
equipment investment projects. On the net exports side, while a financial services recovery started
in 2024 thanks to a pick-up in investment fund revenues, uncertainty surrounding global trade is
set to weaken the prospects of the sector and weigh on the contribution from net exports
throughout 2025. In 2026, domestic demand is expected to continue to support the economy,
while a stabilising international trade situation should support exports.

Labour market set to recover slightly

Following a slowdown in 2024, employment growth is forecast to accelerate to 1.3% in 2025 as
leading indicators signal that the labour market will become tighter and 1.7% in 2026. The
unemployment rate is expected to peak at 6.6% in 2025 before edging down to 6.4% in 2026 as
employment recovers somewhat.

Inflation expected to normalise in 2025

Headline inflation is set to drop to 2.1% in 2025 owing to decelerating food and services prices
while energy prices are expected to rebound slightly following the end of the energy price cap and
the introduction of a new tariff on electricity grids. Headline inflation is projected to further
decrease to 1.8% in 2026 as the inflation of energy, food and services are forecast to decelerate.
Consequently, HICP inflation excluding energy, food, alcohol and tobacco is expected to decrease to
2.0% in 2025 and, to 1.8% in 2026.

114
 Euro Area Member States, Luxembourg

General government balance to turn in a deficit over the forecast horizon

In 2024, the general government balance turned to a surplus of 1.0% of GDP from a deficit of
0.8% of GDP in 2023. Total revenues increased sharply in 2024, in spite of the budgetary impact
of measures to support households’ purchasing power, the competitiveness of enterprises and the
construction sector. Measures included an upward adjustment of personal income tax brackets
following several wage indexations and a reduction in social security contributions for companies,
which have been estimated to shave off revenues. Windfall revenues from taxes on income and
wealth, notably from corporate taxes, and a surge in the property income from state-owned assets
mostly explain the buoyant revenues collection. Expenditure growth slowed down compared to the
previous year on the back of a less inflationary environment, in which the automatic indexation of
wages and social transfers was not triggered. The implementation of the provisional so-called
twelfths’ system in the first part of the year also contributed to the slowdown of expenditure.
In 2025, the general government balance is projected to turn to a deficit of 0.4% of GDP, also on
the back of an expansionary fiscal stance. In spite of the expected rebound in economic activity,
revenues from direct taxes are projected to come in at a slower pace than in the previous year, due
to lower windfall revenues and to the impact of the additional set of government measures to
support households and companies, including a further indexation of tax brackets and a reduction
of the corporate income tax rate. Moreover, the implementation of the wage agreement in the
public sector and of the automatic indexation of wages and social transfers is projected to put
upward pressure on public expenditure, the growth of which is set to accelerate.
The deficit is set to slightly widen to 0.5% of GDP in 2026, as expenditure growth is expected to
outpace revenue growth. Public investment is projected to remain at a high level over the forecast
horizon and support the digital and green transition. The interest rate expenditure increased to
0.3% of GDP in 2024, and it is expected to remain stable at this level in 2025 and 2026.
In spite of the large government surplus, in 2024 the debt-to-GDP ratio increased to 26.3%.
Government debt as percent of GDP is then expected to decline to 25.7% in 2025 before
increasing again to 26.2% of GDP in 2026.

Table III.13.1: Main features of country forecast - LUXEMBOURG

2024 Annual percentage change

mio EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 86104.0 100.0 2.3 6.9 -1.1 -0.7 1.0 1.7 2.0
Private Consumption 27795.0 32.3 1.8 11.4 6.6 2.0 1.3 2.0 2.4
Public Consumption 17039.2 19.8 3.1 4.8 4.0 1.5 4.9 4.4 2.6
Gross fixed capital formation 12344.5 14.3 2.1 14.6 -13.9 -6.4 -7.3 2.5 3.9
Exports (goods and services) 185556.3 215.5 4.1 11.3 1.5 -0.3 0.3 3.1 3.2
Imports (goods and services) 157334.1 182.7 4.4 13.4 2.4 0.4 -0.3 3.8 3.8
GNI (GDP deflator) 60862.8 70.7 0.8 4.5 -5.5 6.5 2.9 0.5 1.4
Contribution to GDP growth: Domestic demand 1.5 6.8 0.2 -0.1 0.2 1.9 1.9
Inventories 0.1 -0.2 -0.1 0.9 -0.3 0.0 0.0
Net exports 0.8 0.3 -1.2 -1.4 1.1 -0.2 0.1
Employment 2.9 2.9 3.3 2.1 1.1 1.3 1.7
Unemployment rate (a) 5.4 5.3 4.6 5.2 6.4 6.6 6.4
Compensation of employees / head 2.5 5.3 4.5 2.4 2.2 3.8 3.3
Unit labour costs whole economy 3.1 1.3 9.1 5.4 2.3 3.3 3.1
Saving rate of households (b) (e) 13.5 18.0 13.4 : : : :
GDP deflator 2.9 5.9 6.2 6.3 5.2 2.5 2.8
Harmonised index of consumer prices 1.9 3.5 8.2 2.9 2.3 2.1 1.8
Terms of trade goods 0.7 1.2 -6.3 1.0 -0.9 0.8 1.3
Trade balance (goods) (c) 1.0 0.5 -0.6 1.5 1.7 1.5 2.1
Current-account balance (c) 3.8 1.2 -3.9 -0.6 2.3 0.8 0.3
General government balance (c) 1.2 1.0 0.2 -0.8 1.0 -0.4 -0.5
Fiscal stance (c) -1.0 0.8 -1.4 -2.1 0.3 -1.1 -0.4
Structural budget balance (d) 1.7 0.4 0.8 0.8 2.7 1.0 0.6
General government gross debt (c) 17.9 24.2 24.9 25.0 26.3 25.7 26.2
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP. (e) Due to known issues with the
household sector compensation of employees (ESA code D1) data for Luxembourg, which will be addressed by the national Statistical Institute only later in 2025,
figures for D1 or depending on D1 in their compilation (e.g. the saving rate of households) will not be published in the present forecast (for years 2023-2026).

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 14. MALTA

Malta's economy is expected to sustain its growth momentum in 2025, driven by robust domestic
consumption and positive net exports. Following a notable 6.0% expansion in GDP in 2024, the
Maltese economy is expected to grow by 4.1% in 2025 and 4.0% in 2026. The labour market is
projected to stabilise and inflation to slow down. On the fiscal front, the government deficit
narrowed to 3.7% of GDP in 2024, and is expected to decline further, going below the 3.0%
threshold in 2026, with the debt ratio stabilising below 48% of GDP.

Growth outlook remains upbeat

Real GDP in 2024 grew by outstanding 6%, 1.0 pps. higher than expected in autumn, on the back
of robust private and public consumption and positive contribution from net exports, namely by the
tourism and financial and professional services sectors.
As inflation slowed down, real households’ Graph III.14.1: Malta - Real GDP growth and contributions
incomes grew and private consumption exhibited
15 pps. forecast
an expansion of 5.7%, while government
consumption rose by 7.3%, giving a substantial 10
boost to overall GDP growth.
5
Services exports remain a strong growth factor in
Malta, driving the positive net trade contribution 0
to GDP. During 2024, total tourist expenditures in
Malta grew by a remarkable 23.1% compared to -5
2023, when the tourist flows already exceeded
-10
the pre-pandemic levels. Other service-oriented 17 18 19 20 21 22 23 24 25 26
sectors such as recreational, professional, IT, and Net exports Investment Priv. consumption
financial services expanded as well. Concerning Gov. consumption Inventories Real GDP (y-o-y%)
the uncertainty in the international environment,
Malta’s economy has a limited exposure to shocks
in goods trade and is set to benefit from lower international commodity prices. Investment growth
recovered by 2.4% in 2024 after a sharp drop in 2023.
Real GDP growth in Malta is forecast to slow down somewhat but to remain robust, at 4.1% in
2025 and 4.0% in 2026. Private consumption is expected to grow at 4.1% in 2025 and 3.9% in
2026, continuing to provide the biggest impulse to economic expansion. Net exports and
investment are also expected to continue to provide a positive contribution. In particular,
investment is forecast to increase by 2.5% in 2025 and 2.1% in 2026. These rates, however, are
visibly below their long-term average.

Employment growth is expected to stabilise

Employment grew by 5.1% in 2024, still supported by strong immigration flows to fill the domestic
labour shortages. Nonetheless, employment growth is expected to decelerate towards pre-
pandemic growth rates, reaching 3.1% in 2025 and 2.8% in 2026. The unemployment rate is set to
remain low at 3.1% in 2025 and 2026. In this tight labour market environment, the nominal wage
growth per employee is forecast to exceed inflation and grow by 4.1% in 2025 and 3.5% in 2026.

Inflation slows in line with the global expectations

Inflation in 2024 slowed to 2.4%. and is forecast to reach 2.2% in 2025 and 2.1% in 2026, with
food and services inflation set to be the main contributors. Energy prices are expected to remain
stable as Maltese authorities continue to maintain energy prices at 2020 levels.

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 Euro Area Member States, Malta

The government deficit is set to decline

In 2024, the general government deficit fell to 3.7% of GDP, from 4.7% in 2023, due mainly to the
increase of taxes on income and wealth driven by non-recurrent transactions as well as gains
related to an improved tax collection. This was partially compensated by an increase of current
expenditures and of other capital expenditures related to the national airline.
In 2025, the deficit is forecast to decrease further to 3.2% of GDP. This is mainly driven by a
decrease in other capital expenditures due to the expiry of costs related to the national airline.
Subsidies are expected to further drop as percentage of GDP while the measures to mitigate the
impact of high energy prices are projected to remain unchanged in nominal terms, thereby
declining as a share of GDP. Social expenditures are also expected to decline somewhat as a share
of GDP. This is projected to be partially compensated by decreasing revenues from personal
income taxes, due to a comprehensive reform of income brackets. Based on unchanged policies,
the deficit is set to decline to 2.8% of GDP in 2026 mainly reflecting a further decrease of
subsidies as a share of GDP and the higher growth rate of revenues compared to the growth rate
of nominal GDP.
The public debt-to-GDP ratio is expected to broadly stabilise over the forecast horizon below 48%
of GDP.

Table III.14.1: Main features of country forecast - MALTA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 22.5 100.0 4.5 13.3 4.3 6.8 6.0 4.1 4.0
Private Consumption 10.5 46.6 2.4 11.8 11.1 12.2 5.7 4.1 3.9
Public Consumption 3.9 17.2 5.2 6.0 0.1 3.1 7.3 4.7 4.2
Gross fixed capital formation 4.0 17.9 5.2 22.2 9.8 -17.0 2.4 2.5 2.1
Exports (goods and services) 27.7 123.5 8.6 -0.4 13.7 5.6 5.3 3.5 2.9
Imports (goods and services) 23.8 106.1 7.9 -2.8 18.4 2.0 4.7 3.1 2.4
GNI (GDP deflator) 19.5 86.6 3.7 12.0 2.3 7.4 5.9 4.6 3.8
Contribution to GDP growth: Domestic demand 3.4 10.8 6.8 1.8 4.4 3.1 2.9
Inventories 0.0 -0.3 -0.1 0.0 0.0 0.0 0.0
Net exports 1.2 2.8 -2.5 5.0 1.6 1.0 1.1
Employment 3.2 2.8 4.9 6.8 5.1 3.1 2.8
Unemployment rate (a) 5.7 3.8 3.5 3.5 3.1 3.1 3.1
Compensation of employees / head 3.7 4.9 5.0 2.3 5.9 4.1 3.5
Unit labour costs whole economy 2.4 -4.8 5.7 2.3 5.0 3.1 2.2
Saving rate of households (b) 6.4 20.2 13.2 11.4 : : :
GDP deflator 2.4 2.4 5.1 5.3 3.2 2.5 2.2
Harmonised index of consumer prices 1.8 0.7 6.1 5.6 2.4 2.2 2.1
Terms of trade goods 0.5 0.2 1.3 0.7 0.2 0.1 0.0
Trade balance (goods) (c) -16.0 -12.1 -17.5 -15.4 -11.8 -11.5 -11.1
Current-account balance (c) 0.3 3.6 -1.8 4.6 3.6 3.7 3.4
General government balance (c) -1.8 -7.0 -5.2 -4.7 -3.7 -3.2 -2.8
Fiscal stance (c) 0.6 -2.9 -0.3 0.4 -1.3 1.9 0.8
Structural budget balance (d) -1.0 -7.0 -4.5 -4.4 -3.6 -3.0 -2.3
General government gross debt (c) 58.3 49.8 49.5 47.9 47.4 47.6 47.3
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

117
 15. THE NETHERLANDS

Real GDP growth in the Netherlands is forecast to pick up to 1.3% in 2025, driven by domestic
demand and despite the US tariffs weighing on trade. Substantial wage growth and the resulting
expansion of real disposable income is expected to drive a strong increase in private consumption.
The US tariffs on the other hand are projected to reduce export growth. In 2026, GDP growth is set
to come down to 1.2% as the negative impact of decreased trade and high uncertainty persists.
Growth in domestic demand is set to moderate because of the increased uncertainty and
somewhat lower real wage growth. The government deficit is forecast to increase to 2.1% in 2025
and to widen further in 2026.

Domestic demand to drive economic growth

Wage growth in the Netherlands accelerated to Graph III.15.1: The Netherlands - Real GDP growth and
well above 6% in 2024 and is forecast to remain contributions
robust in 2025. This is set to improve households’ 8 pps. forecast
real disposable income by more than 3% in 2025
6
and drive strong growth in private consumption.
Domestic demand is further supported by an 4

ambitious public investment agenda in, among 2

others, the areas of defence, the green transition 0

and the housing market. At the same time, -2
economic uncertainty has increased substantially
-4
because of the US tariffs and the potential
retaliatory actions by trading partners. This -6
17 18 19 20 21 22 23 24 25 26
uncertainty is expected to affect business
Net exports Investment Priv. consumption
investment spending while consumers are
Gov. consumption Inventories Real GDP (y-o-y%)
assumed to slightly increase their precautionary
savings.
The imposition of US tariffs is also projected to lower both export and import growth in 2025. With
about 5% of total Dutch goods exports going to the US, the negative impact of the tariffs on total
trade is estimated to be relatively small. However, certain sectors, such as the (relatively large)
steel industry and the machinery and vehicle sectors, are set to be disproportionately affected.
Overall, real GDP growth in 2025 is forecast at 1.3%.
In 2026, real GDP growth is forecast to come down to 1.2% as the negative impact from the
tariffs and increased uncertainty persist while growth in domestic demand slows down somewhat.

Labour market tightness is easing somewhat

The number of vacancies well exceeded the number of unemployed in the past three years, but
this ratio has gradually become more balanced and reached parity in the first quarter of 2025.
Employment growth has been slowing down in recent months, and the unemployment rate has
increased from 3.6% in mid-2024 to 3.8% in early 2025. Going forward, the slowdown in
employment growth is set to result in a marginal pick up in unemployment from 3.7% in 2024 to
3.9% in 2025 and 4.0% in 2026. Nominal wage growth reached 6.4% in 2024 and is expected to
remain elevated going forward, though slowly easing to 5.1% in 2025 and 3.7% in 2026.

Inflation remains relatively high

HICP inflation in the first quarter of 2025 was 3.3%, higher than a year earlier (3%). The relatively
high inflation in the Netherlands is caused by high services and processed food inflation. Strong
growth in nominal wages and rental prices drove the increase in services inflation, while an
increase in excise duties on (among others) tobacco led to a surge in processed food price inflation.
As wage growth remains substantial in 2025, services inflation is projected to only come down

118
 Euro Area Member States, The Netherlands

gradually. At the same time, processed food inflation is also expected to remain elevated, only
coming down more substantially as of mid-2025 when the effects of last year’s tax increase
dissipate. At the same time, energy price futures signal a decrease in oil, gas and electricity prices.
Overall, annual HICP inflation is forecast at 3.0% in 2025 and 2.0% in 2026.

Government deficit to widen on the back of tax cuts and increased spending
The general government deficit increased to 0.9% of GDP in 2024, up from 0.4% in 2023. The
general government balance was affected by compensation payments to taxpayers following a
court ruling invalidating the wealth tax based on assumed rather than actual returns.
In 2025, the deficit is set to increase to 2.1%. On the revenue side, this is driven by structural cuts
in personal income taxation, with a budgetary impact of 0.3% of GDP as of 2025. At the same
time, expenditure is projected to grow as public investments are expected to further increase.
Higher-than-expected spending due to wage and price increases as well as social benefits also
increase the deficit while the shifting of funds that are likely not spent in 2025 to later years has
the opposite effect.
The government balance in 2026 is set to be temporarily affected by a reform of the military
pension system that requires a transfer of approximately 0.7% of GDP from the government to a
private pension fund. Increases of the VAT rates for accommodation services as well as limiting
the indexation of personal income tax brackets are expected to contribute to a moderate increase
in revenue in 2026, although not sufficient to compensate for the increase in spending. The deficit
for 2026 is forecast to reach 2.7%.
The general government debt continued its downward trend and fell to 43.3% of GDP in 2024.
However, higher deficits thereafter are expected to increase the debt ratio to 45.0% in 2025 and
47.8% in 2026, still below the euro area average.

Table III.15.1: Main features of country forecast - THE NETHERLANDS

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 1134.1 100.0 1.2 6.3 5.0 0.1 1.0 1.3 1.2
Private Consumption 489.1 43.1 0.2 4.5 6.9 0.8 1.2 1.9 1.8
Public Consumption 289.1 25.5 1.8 4.7 1.3 2.9 3.6 1.8 1.3
Gross fixed capital formation 223.8 19.7 1.8 2.4 3.4 1.3 -0.5 0.8 1.5
Exports (goods and services) 954.2 84.1 3.6 6.9 4.4 -0.5 0.4 0.7 1.9
Imports (goods and services) 817.0 72.0 3.7 6.5 4.4 -1.8 0.3 1.2 2.2
GNI (GDP deflator) 1118.6 98.6 1.1 11.0 2.2 0.7 0.4 1.3 1.3
Contribution to GDP growth: Domestic demand 0.9 3.6 4.0 1.3 1.3 1.4 1.4
Inventories 0.0 1.7 0.5 -2.3 -0.5 0.1 -0.1
Net exports 0.3 0.9 0.5 1.1 0.1 -0.3 0.0
Employment 0.9 1.7 3.9 1.6 1.0 0.3 0.2
Unemployment rate (a) 6.2 4.2 3.5 3.6 3.7 3.9 4.0
Compensation of employees / head 2.0 2.7 3.6 6.3 6.4 5.1 3.7
Unit labour costs whole economy 1.7 -1.6 2.5 7.9 6.5 4.1 2.7
Saving rate of households (b) 13.7 19.1 14.4 14.5 14.4 15.8 15.6
GDP deflator 1.5 2.7 6.2 7.3 5.2 3.7 2.6
Harmonised index of consumer prices 1.5 2.8 11.6 4.1 3.2 3.0 2.0
Terms of trade goods 0.1 -1.2 -4.1 3.6 2.5 1.4 1.6
Trade balance (goods) (c) 8.8 7.3 5.5 8.0 8.7 9.2 9.7
Current-account balance (c) 6.5 10.0 6.6 9.9 10.0 10.2 10.6
General government balance (c) -1.6 -2.2 0.0 -0.4 -0.9 -2.1 -2.7
Fiscal stance (c) -0.2 -1.1 0.4 0.5 0.2 -0.6 0.2
Structural budget balance (d) 0.0 -1.7 -1.2 -1.0 -0.4 -1.5 -1.3
General government gross debt (c) 56.4 50.5 48.4 45.2 43.3 45.0 47.8
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

119
 16. AUSTRIA

Austria is projected to experience its third consecutive year of economic recession in 2025.
This results from low investment, modest consumption and declining exports, exacerbated by
international trade tensions. Growth is set to resume only in 2026. The government deficit is
projected to be above 4% of GDP in 2025 and 2026, and the government debt-to-GDP ratio is
forecast to remain above 80%.

The recession continues in 2025

Real GDP contracted by 1% in 2023 and by 1.2% Graph III.16.1: Austria - Real GDP growth and contributions
in 2024, due to stagnant consumption and
8 pps. forecast
declining investment. The cost competitiveness of
6
the industrial sector has suffered due to high
4
energy prices and strongly increasing unit labour
costs. Industrial production declined by 5.4% in 2

2024. Goods exports shrank by 5.9%, 0

counterweighed by goods imports going down by -2

7.1%. -4

-6
In 2025, private consumption is expected to grow
-8
modestly, recouping some lost ground after two 17 18 19 20 21 22 23 24 25 26
weak years when consumption per capita declined Net exports Investment Priv. consumption
and saving rates reached historically high levels.
Gov. consumption Inventories Real GDP (y-o-y%)
Last year’s strong real income gains and a slow
unwinding of savings are set to support
consumption, despite the planned fiscal consolidation measures. Investment is expected to decline
further, with low-capacity utilisation in industry weighing on equipment investment. By contrast,
construction investment is expected to start recovering slowly, supported by slowly declining
housing loan rates. The loss of cost competitiveness and the weakness of the industrial sector in
Europe is set to be a drag on Austrian net exports. Last year, exports to the US, Austria’s second
most important export destination, grew dynamically reaching 8.5% of total exports, but this year,
trade tensions create headwinds for exports.
In 2026, a return to growth is projected, with strengthening private consumption and investment
growth turning positive. However, trade tensions are projected to weigh on Austria’s economic
performance.
Overall, in 2025, GDP is expected to decline by 0.3%. In 2026, growth is projected to pick up to 1%.

Unemployment is increasing moderately

The prolonged recession has affected the labour market. The unemployment rate has been
increasing slowly but steadily since its post-COVID 19 trough of 4.8% in 2022. It is now expected
to peak at 5.3% this year. As the economy picks up in 2026, unemployment is expected to reduce
to 5.2%. Austria reached a demographic turning point this year with the working age population
starting to decline, but the labour supply is still growing slowly. This is mostly due to an increase in
female participation, as a result of the steady increase in the statutory retirement age of women,
which is being adjusted upwards by six months each year to be aligned with that of men in 2033.
Wages per employee grew by more than 8% in 2024 as workers were compensated for past
inflation via collective bargaining agreements. Going forward, wage growth is projected to ease
gradually, driven by the labour market slack and lower inflation.

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 Euro Area Member States, Austria

Inflation remains above 2%

In the first quarter of 2025, the inflation rate increased to 3.3% due to a strong increase in retail
energy prices. This was mainly driven by expiring energy relief measures such as reinstated fees
on electricity and high wholesale oil and gas prices at the beginning of the year. Persistent services
inflation also contributes to the elevated inflation rate in 2025, at 2.9% In 2026, inflation is
projected to go down again, supported by lower energy commodity prices and the slowdown of unit
labour cost, averaging 2.1%.

A government deficit above 4% despite consolidation efforts

The general government deficit is projected to decrease from 4.7% of GDP in 2024 to 4.4% in
2025 to 4.2% in 2026. Fiscal consolidation efforts are taking place, amounting to around 1.1% of
GDP in 2025.
On the expenditure side, this includes the abolition of the climate bonus (a lump-sum
compensation for CO2 pricing), the elimination of a state-financed upskilling leave and cuts in
public consumption. However, the increased spending on public salaries, pensions and social
expenditure due to inflation indexation, as well as other ageing-related costs, continue to weigh
significantly on public finances, reducing the effects of the consolidation package substantially.
On the revenue side, taxes on production and social contributions are projected to contribute to the
reduction of the deficit. Some consolidation measures, such as the increase in the stability levy for
banks, the extension of the energy crisis contribution for energy producers and the rise in the
health insurance contributions of pensioners, are also set to generate additional revenues. At the
same time, revenue growth from personal and corporate income taxes is projected to slow down
over the forecast horizon, reducing the impact of the consolidation efforts.
A still high general government deficit in the context of muted GDP growth is projected to drive the
debt-to-GDP ratio upwards. At 81.8% of GDP in 2024, the government debt ratio, is expected to
increase to 84.0% in 2025 and 85.8% in 2026.

Table III.16.1: Main features of country forecast – AUSTRIA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 481.9 100.0 1.0 4.8 5.3 -1.0 -1.2 -0.3 1.0
Private Consumption 254.0 52.7 0.5 4.8 4.9 -0.5 0.1 0.3 1.0
Public Consumption 105.9 22.0 1.1 7.6 -0.6 1.2 1.6 -0.4 -0.4
Gross fixed capital formation 117.3 24.3 1.3 6.0 0.4 -3.2 -3.4 -0.7 1.9
Exports (goods and services) 274.3 56.9 2.5 9.5 10.0 -0.4 -4.3 -1.0 1.9
Imports (goods and services) 258.4 53.6 2.3 14.1 7.1 -4.6 -5.0 -0.6 1.9
GNI (GDP deflator) 479.2 99.4 1.1 5.4 4.0 -1.4 -1.8 -0.5 0.8
Contribution to GDP growth: Domestic demand 0.8 5.5 2.4 -0.8 -0.5 -0.1 0.9
Inventories 0.0 1.3 1.3 -3.0 -1.0 0.0 0.0
Net exports 0.2 -1.9 1.7 2.6 0.4 -0.2 0.1
Employment 1.0 2.0 2.6 0.8 0.0 0.1 0.4
Unemployment rate (a) 5.5 6.2 4.8 5.1 5.2 5.3 5.2
Compensation of employees / head 2.2 2.9 4.9 6.8 8.4 3.2 3.1
Unit labour costs whole economy 2.2 0.2 2.2 8.7 9.8 3.6 2.6
Saving rate of households (b) 15.1 17.3 15.0 14.9 18.0 17.4 16.7
GDP deflator 1.9 1.9 4.8 6.6 3.1 3.5 2.2
Harmonised index of consumer prices 1.9 2.8 8.6 7.7 2.9 2.9 2.1
Terms of trade goods -0.2 -1.3 -6.8 -1.0 2.3 2.4 0.2
Trade balance (goods) (c) 0.2 0.0 -1.9 0.9 2.1 2.5 2.5
Current-account balance (c) 2.4 1.8 -0.8 1.4 2.0 2.4 2.3
General government balance (c) -2.3 -5.7 -3.4 -2.6 -4.7 -4.4 -4.2
Fiscal stance (c) -0.6 -1.6 -3.7 0.1 -2.3 1.3 0.3
Structural budget balance (d) -1.1 -4.7 -4.8 -2.8 -4.0 -3.4 -3.6
General government gross debt (c) 78.0 82.4 78.4 78.5 81.8 84.0 85.8
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
Note : Contributions to GDP growth may not add up due to statistical discrepancies.

121
 17. PORTUGAL

Domestic demand is set to continue supporting economic growth in Portugal while exports of
goods face significant headwinds due to global trade tensions. Headline inflation is projected to
continue easing amid moderating employment and wage growth and a marginal drop in
unemployment. Portugal is expected to continue to pursue an expansionary fiscal policy, turning
the general government surplus into a deficit by 2026.

Economic activity to retain sound growth path despite headwinds

Following a strong rebound in the last quarter of 2024, Portugal’s economy contracted by 0.5% (q-
o-q) in the first quarter of 2025. This was mainly driven by retroactive wage tax adjustments that
temporarily pushed up disposable income in late 2024. Both private consumption and savings
increased substantially and were followed by a correction at the beginning of 2025. In addition,
business and consumer sentiments deteriorated in the first quarter of the year facing high
geopolitical uncertainty. By contrast, exports of goods increased, most likely due to anticipation of
sales ahead of the forthcoming US tariff hikes. Across the main business sectors, services
continued to support the economy, helped by solid income growth.
The escalation of global trade tensions in April is Graph III.17.1: Portugal - Real GDP growth and contributions
expected to weigh on Portugal’s economic
8 pps.
performance in the coming months. By contrast, forecast
6
the projected acceleration in the implementation 4
of the RRP is set to boost investments along with 2
two large private projects in the car industry. In 0
the external sector, imports are projected to grow -2
faster than exports but the current account is -4

expected to remain in surplus, benefiting from -6

lower energy prices. -8

-10
Growth is forecast to moderate from 1.9% in 17 18 19 20 21 22 23 24 25 26

2024 to 1.8% in 2025 as the strong domestic Net exports Investment Priv. consumption

demand is offset by setbacks in external demand. Gov. consumption Inventories Real GDP (y-o-y%)
In 2026, growth is expected to improve to 2.2%.
While Portugal’s direct exposure to the US market is relatively limited, risks of significant indirect
setbacks remain high and relate to global trade disruptions and uncertainty. On the positive side,
Portugal’s recent increase in household savings and possible expenditure switching towards
domestically produced goods could result in higher than projected demand. All in all, the balance of
risks is tilted to the downside as the high level of external risks appears only partly offset by
domestic factors.

Labour supply and employment keep rising, helped by migration

Unemployment remained relatively stable at 6.5% in 2024 and the first months of 2025 as both
employment and labour supply continued to rise at a strong pace, helped by net migration. The
employment rate for the age group of 16-74 reached a new historic high of 64.1% in 2024.
Employment growth is projected to moderate somewhat this year but still lead to a marginal drop
in unemployment to 6.4% in 2025 and 6.3% in 2026. Wages are set to continue rising slightly
faster than nominal GDP due to tight labour conditions in sectors such as information technologies
and construction.

Inflation continues to decelerate

Headline inflation resumed its downward path in the first quarter of 2025 after a temporary uptick
in late 2024 driven by energy and services. Given the steep drop in prices of crude oil and other
commodities, inflation is projected to ease further in the coming months, slowing down from 2.7%

122
 Euro Area Member States, Portugal

in 2024 to 2.1% in 2025 and 2.0% in 2026. Inflation excluding energy and food is set to remain
slightly higher as wage growth and strong domestic demand are expected to keep services
inflation elevated albeit in a slight disinflationary trajectory. The price pressure in the tourism
sector is also projected to remain relatively high as foreign tourism is expected to continue
growing despite tensions in global trade of goods.

Fiscal policy measures put the budget surplus under strain

In 2024, Portugal’s general government balance recorded a surplus of 0.7% of GDP, 0.5 pps. of
GDP below 2023. Government revenue growth decelerated reflecting fiscal policy measures as the
reduction in personal income tax rates. This was partly offset by the higher receipts from the
corporate income tax and value-added tax as well as the increased revenue from social
contributions. Government expenditure continued to expand on the back of higher public wages
and social transfers, particularly related to public pensions.
Going forward, the general government balance is expected to contract to 0.1% of GDP in 2025.
Current expenditure is projected to continue to grow amid fiscal policy measures that increase
public wages and pensions. Public investment is expected to pick up significantly in 2025. At the
same time, government revenue growth is forecast to decelerate. Direct taxation policy measures,
as the broadening of the youth personal income tax scheme, are projected to weigh on tax
revenues. Social contributions are expected to remain resilient on the back of sustained economic
activity and households’ higher disposable income.
Portugal’s fiscal stance is expected to remain expansionary in 2026 based on a no-policy change
assumption. For next year, the general government balance is forecast to turn into a deficit of
0.6% of GDP. This reflects the impact of fiscal policy measures as the reduction of the corporate
income tax rate and public investment financed by RRF loans. Risks to the fiscal outlook are on the
downside and relate, among others, to ongoing financial rebalancing requests of public-private
partnerships and to financial vulnerabilities in the state-owned enterprise sector.
After recording 94.9% of GDP in 2024, nearly 3.0 pps. below 2023, Portugal’s public debt-to-GDP
ratio is projected to continue declining. It is forecast to reach 91.7% in 2025 and 89.7% in 2026,
driven by primary balance surpluses and favourable growth-interest rate differentials.

Table III.17.1: Main features of country forecast - PORTUGAL

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 285.2 100.0 0.1 5.6 7.0 2.6 1.9 1.8 2.2
Private Consumption 174.7 61.3 0.2 4.9 5.6 1.9 3.2 3.3 2.8
Public Consumption 48.0 16.8 0.0 3.8 1.7 0.6 1.1 1.2 1.2
Gross fixed capital formation 56.5 19.8 -0.7 7.8 3.3 3.6 3.0 3.5 4.3
Exports (goods and services) 132.6 46.5 2.8 12.0 17.2 3.8 3.4 1.7 2.8
Imports (goods and services) 127.4 44.7 2.0 12.3 11.3 1.8 4.9 4.3 4.1
GNI (GDP deflator) 280.0 98.2 0.1 6.0 6.1 1.7 2.8 1.7 2.3
Contribution to GDP growth: Domestic demand 0.0 5.4 4.5 2.0 2.7 2.9 2.8
Inventories 0.0 0.5 0.3 -0.3 -0.1 0.0 0.0
Net exports 0.2 -0.3 2.1 1.0 -0.7 -1.1 -0.5
Employment -0.2 1.4 3.7 1.0 1.6 1.0 0.9
Unemployment rate (a) 11.1 6.7 6.2 6.5 6.5 6.4 6.3
Compensation of employees / head 1.8 5.9 5.6 8.0 8.0 4.9 4.0
Unit labour costs whole economy 1.5 1.7 2.4 6.4 7.7 4.1 2.6
Saving rate of households (b) 8.5 11.0 7.3 8.3 12.2 11.9 11.6
GDP deflator 1.7 2.0 5.3 7.0 4.4 3.1 2.2
Harmonised index of consumer prices 1.3 0.9 8.1 5.3 2.7 2.1 2.0
Terms of trade goods 0.4 0.1 -2.9 3.4 2.4 1.2 0.0
Trade balance (goods) (c) -8.4 -7.6 -11.2 -9.7 -9.2 -9.6 -10.0
Current-account balance (c) -4.1 -0.9 -2.3 0.3 1.7 1.2 0.9
General government balance (c) -5.0 -2.8 -0.3 1.2 0.7 0.1 -0.6
Fiscal stance (c) -0.1 -0.9 -1.1 1.2 -1.6 -1.4 -1.2
Structural budget balance (d) -1.5 -1.3 -0.8 1.1 0.3 0.0 -0.8
General government gross debt (c) 109.2 123.9 111.2 97.7 94.9 91.7 89.7
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

123
 18. SLOVENIA

After growing by 1.6% in 2024, Slovenia’s GDP is forecast to increase by 2.0% in 2025 and 2.4%
in 2026. Inflation is expected to remain rather stable over the forecast horizon and the
unemployment rate to remain low. The general government deficit dropped markedly to 0.9% of
GDP in 2024 and is forecast to increase to 1.3% of GDP in 2025. The debt-to-GDP ratio is
projected to decrease, from 67.0% in 2024 to 65.5% in 2025 and 63.8% in 2026.

Growth set to continue, supported by domestic demand and exports

GDP grew by 1.6% in 2024, supported by private consumption and exports. Following the 2023-
boom in construction, both residential and non-residential construction decreased in 2024,
accompanied by a fall in investment in machinery and equipment. The contribution from net
exports turned negative as imports increased by 3.9% while exports grew by 3.2%. Terms of trade
continued to improve and the current account surplus increased. Employment growth was modest
compared to recent years, while real wages increased substantially at around 4,2%.
Despite global headwinds, GDP growth is forecast Graph III.18.1: Slovenia - Real GDP growth and contributions
to accelerate to 2.0% in 2025 and to 2.4% in
12 pps. forecast
2026. Private consumption is projected to
10
continue to expand in 2025 and 2026, still 8
supported by employment growth and rising 6
wages. However, the savings rate is expected to 4
increase to around 13.5% in 2025. Public 2
investment is set to remain buoyant thanks to the 0
continued deployment of RRF-financed -2
investment and the pursuit of reconstruction -4
works after the floods. Private investment, on the -6
17 18 19 20 21 22 23 24 25 26
other hand, is projected to be strongly influenced
Net exports Investment Priv. consumption
by global uncertainty and lower global demand. In
2025, exports are set to increase slightly stronger Gov. consumption Inventories Real GDP (y-o-y%)

than export market demand, as market share

increase is projected to continue. In 2026, similar trends continue: growth is expected to continue
to be supported by domestic demand, with investment growth also picking up.

The labour market remains tight

The employment rate is at a historic peak but further small gains are still expected, as
employment is forecast to increase by 0.6% in 2025 and 0.7% in 2026, driven by inflows of
foreign workers. The unemployment rate fell to 3.7% and wages increased by over 6% in 2024.
The unemployment rate is set to remain stable over the forecast horizon. With the labour market
remaining very tight, wages are forecast to increase by 5.6% in 2025 and by 4.7% in 2026.
Following three years of decline, real unit labour costs increased slightly in 2024 and are projected
to continue to increase over 2025-26.

Inflation set to increase slightly in 2025

Inflation fell to 2% in 2024, reaching its lowest in the third quarter at 1.1%. However, it increased
to 2.1% in the first quarter of 2025. The impact of lower energy prices over the forecast horizon is
offset by the projected increase in food and services prices. Inflation is forecast to average 2.1% in
2025 and 1.9% in 2026. Inflation excluding energy and food is also expected to increase to 2.2%,
driven by increases in services prices.

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 Euro Area Member States, Slovenia

Public debt on a declining path

The general government deficit declined markedly to 0.9% of GDP in 2024, due to high property
income revenues and temporary tax increases aimed at financing reconstruction following the
2023 floods.
In 2025, the general government deficit is projected to widen somewhat to 1.3% of GDP. Revenue
is set to increase due to the new long-term care contribution paid from wages and pensions and
the higher CO2 emissions tax. Higher revenue from these sources is projected to be partially offset
by higher social transfers in kind due to the new long-term care system, which is being phased in
gradually. A higher wage bill is projected as part of an on-going reform of the public sector wage
grid. Higher subsidies for the green transition, in particular for a gradual exit from coal, are
expected to be only partially offset by a withdrawal of the last remaining measures to mitigate the
impact of high energy prices.
In 2026, the general government deficit is forecast to increase to 1.5% of GDP mostly due to the
continued phasing in of the public sector wage reform. Higher economic growth and the full-year
impact of the new long-term care contribution is also expected to lead to higher revenue.
The debt-to-GDP ratio is forecast to decrease gradually from 67.0% in 2024 to 65.5% in 2025 and
to 63.8% in 2026 thanks to a debt-decreasing interest-growth-rate differential, while primary
deficits are set to contribute marginally to debt developments.

Table III.18.1: Main features of country forecast – SLOVENIA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 67.0 100.0 1.7 8.4 2.7 2.1 1.6 2.0 2.4
Private Consumption 34.6 51.7 1.4 10.5 5.3 0.1 1.6 2.2 2.3
Public Consumption 13.8 20.6 1.4 6.2 -0.7 2.4 8.5 2.8 3.7
Gross fixed capital formation 13.4 20.1 -0.3 12.3 4.2 3.9 -3.7 0.7 2.8
Exports (goods and services) 54.6 81.5 4.6 14.5 6.8 -2.0 3.2 2.2 3.0
Imports (goods and services) 50.2 74.9 3.5 17.8 9.2 -4.5 3.9 2.2 3.4
GNI (GDP deflator) 66.4 99.1 1.7 7.6 2.0 2.7 1.6 2.1 2.5
Contribution to GDP growth: Domestic demand 1.0 8.9 3.4 1.4 1.7 1.9 2.5
Inventories -0.1 0.5 0.8 -1.5 0.3 0.0 0.0
Net exports 0.8 -1.0 -1.5 2.3 -0.4 0.2 -0.1
Employment 0.7 1.3 2.9 1.6 0.1 0.6 0.7
Unemployment rate (a) 6.9 4.8 4.0 3.7 3.7 3.7 3.8
Compensation of employees / head 3.3 8.0 5.0 9.5 6.2 5.6 4.7
Unit labour costs whole economy 2.3 0.9 5.2 9.0 4.7 4.2 2.9
Saving rate of households (b) 13.8 17.6 13.4 14.3 12.9 13.5 13.1
GDP deflator 1.7 2.7 6.5 10.1 3.1 2.8 2.7
Harmonised index of consumer prices 1.8 2.0 9.3 7.2 2.0 2.1 1.9
Terms of trade goods -0.2 -2.3 -2.9 4.0 0.8 0.2 0.4
Trade balance (goods) (c) 0.3 1.7 -4.3 0.7 1.0 1.1 0.9
Current-account balance (c) 1.7 3.7 -1.1 4.4 4.6 4.7 4.8
General government balance (c) -3.3 -4.6 -3.0 -2.6 -0.9 -1.3 -1.5
Fiscal stance (c) -0.3 -2.0 -2.0 1.1 1.1 -0.3 -0.8
Structural budget balance (d) -1.0 -5.8 -4.3 -3.0 -1.2 -1.2 -2.1
General government gross debt (c) 54.9 74.8 72.7 68.4 67.0 65.5 63.8
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

125
 19. SLOVAKIA

GDP is expected to expand by 1.5% in 2025, as Slovak export recovery slows down due to the
direct and indirect effects of increased global protectionism, and government fiscal consolidation
weighs on domestic demand. In 2026, GDP growth is expected to slow down to 1.4% as net
exports decrease. Inflation is projected to increase to 4.0% this year due to increased taxes and
higher wage growth, before moderating to 2.9% in 2026. The tight labour market is projected to
keep real wage growth even though the economy is expected to slow down. The public deficit is
expected to decrease to 4.9% of GDP in 2025 before increasing to 5.1% in 2026.

Growth outlook balances export challenges with robust investments

Real GDP is expected to grow by 1.5% in 2025, mainly supported by private consumption and
investment of EU funds and defence. Slovak exports recovered only mildly in 2024, and they are
projected to remain sluggish in view of the rising trade restrictions and uncertainty. Although
output in the Slovak automobile industry grew significantly, some exports were already suspended
in response to the imposition of US tariffs. Export growth is therefore expected to moderate as of
Q2 2025. While Slovakia is expected to continue expanding its exports, a weaker economic
performance of the country’s major trading partners poses an important downside risk.
In 2025, private consumption growth is set to Graph III.19.1: Slovakia - Real GDP growth and contributions
decelerate, affected by the VAT tax increase in
10 pps. forecast
the first quarter and economic uncertainty.
8
However, steady wage growth keeping up with 6
the rebound in consumer price inflation is 4
expected to provide an extra stimulus to private 2
consumption. Public investment is set to be 0
strong, supported by the deployment of EU funds -2

and defence equipment purchases. Net exports -4

are no longer projected to contribute to growth as -6

-8
increases in imports are expected to outpace 17 18 19 20 21 22 23 24 25 26
increases in exports. Overall, real GDP growth is
Net exports Investment Priv. consumption
projected at 1.4% in 2026.
Gov. consumption Inventories Real GDP (y-o-y%)
The spending of RRF funds is set to increase in
2025 and 2026, supporting economic growth through public expenditure amid global economic
uncertainties. Nevertheless, the potential need for further consolidation efforts poses a downside
risk to growth in 2026.

Persistent low unemployment supported by robust labour demand

The unemployment rate is expected to stabilize at 5.4% in both 2025 and 2026 as slowing
employment growth is set to be offset by a shrinking labour force. The labour market is expected
to remain tight with record low levels of unemployment, highest unfilled vacancies and highest
presence of foreign workers. Starting in 2025, the implementation of higher corporate income
taxes and limited public sector wage increases are projected to slow down growth in compensation
of employees. Nevertheless, the compensation of employees is still expected to grow faster than
inflation over the forecast horizon, resulting in a slight increase in real wages.

Inflationary pressures set to rise, as energy price supports come to an end

In 2024, headline inflation eased to 3.2% due to continuing government interventions to limit
energy prices for households which were extended into 2025. VAT and other tax increases included
in the fiscal consolidation package led to an increase in prices in early 2025 that is set to be visible
in annual inflation rates throughout 2025. Prices in the services sector, driven by strong wage

126
 Euro Area Member States, Slovakia

growth, are expected to be the main driver of inflation. As a result, HICP inflation is forecast to rise
to 4.0% in 2025, and to moderate to 2.9% in 2026.

Reduction of public deficit driven by fiscal consolidation

In 2024, the general government deficit increased to 5.3% of GDP due to the higher compensation
of public employees, and higher spending in several social benefits, which were mostly of a
permanent nature. The deficit is forecast to decrease to 4.9% in 2025, primarily driven by the
fiscal consolidation package. Nonetheless, the consolidation efforts will be partially offset by the
postponed delivery of military equipment from previous years. Permanent expenditure measures
combined with worsening macroeconomic conditions, and the absence of new consolidating
measures is expected to increase the deficit to 5.1% of GDP by 2026.
The most significant fiscal consolidation measures contributing to a decrease in public deficit in
2025 include adjustments to VAT and corporate income tax rates and the introduction of a
financial transaction tax. While a reduction in public wage bill spending will contribute, its impact
will be comparatively modest.
The government debt-to-GDP ratio is expected to increase from 59.3% in 2024 to 60.3% in 2025,
reaching 63.0% of GDP in 2026. This rise is primarily due to significant deficits projected over the
forecast period.

Table III.19.1: Main features of country forecast - SLOVAKIA

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 131.0 100.0 3.3 5.7 0.4 2.2 2.1 1.5 1.4
Private Consumption 77.0 58.8 2.9 3.0 5.1 -3.1 2.9 0.9 1.6
Public Consumption 27.4 20.9 2.7 3.7 -2.9 -2.5 3.7 0.9 0.8
Gross fixed capital formation 26.6 20.3 2.2 5.1 4.3 4.0 1.8 3.6 3.8
Exports (goods and services) 111.6 85.2 5.8 10.7 2.8 -0.7 0.3 1.9 1.8
Imports (goods and services) 111.4 85.0 4.8 11.7 4.2 -7.6 2.3 2.1 2.4
GNI (GDP deflator) 128.0 97.7 3.5 3.6 0.3 3.2 1.9 1.3 1.3
Contribution to GDP growth: Domestic demand 2.7 3.5 3.1 -1.6 2.9 1.4 1.9
Inventories -0.1 2.9 -1.4 -3.6 1.0 0.2 0.0
Net exports 0.8 -0.7 -1.3 7.3 -1.8 -0.2 -0.5
Employment 1.0 -0.6 1.8 0.3 -0.2 -0.1 -0.1
Unemployment rate (a) 11.2 6.8 6.1 5.8 5.3 5.3 5.3
Compensation of employees / head 4.8 6.9 5.9 10.3 7.3 4.9 4.4
Unit labour costs whole economy 2.4 0.6 7.3 8.3 5.0 3.3 2.9
Saving rate of households (b) 8.8 11.4 5.9 7.4 5.9 6.0 5.6
GDP deflator 1.2 2.2 7.5 10.1 3.6 3.9 3.3
Harmonised index of consumer prices 2.0 2.8 12.1 11.0 3.2 4.0 2.9
Terms of trade goods -0.8 -1.1 -4.4 0.5 1.5 0.2 0.4
Trade balance (goods) (c) 0.1 -1.4 -6.6 0.6 -0.3 -0.7 -0.9
Current-account balance (c) -2.8 -4.4 -9.2 -0.1 -1.6 -2.3 -2.5
General government balance (c) -3.5 -5.1 -1.7 -5.2 -5.3 -4.9 -5.1
Fiscal stance (c) -0.1 -1.0 0.5 -5.7 2.2 0.2 0.0
Structural budget balance (d) -2.3 -5.7 -1.9 -5.4 -5.2 -4.5 -4.6
General government gross debt (c) 44.8 60.2 57.7 55.6 59.3 60.9 63.0
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

127
 20. FINLAND

Following two years of recession, real GDP is expected to grow by 1.0% in 2025 and 1.3% in 2026.
The unemployment rate is forecast to decline to 8.3% by 2026, while HICP inflation is set to
remain below 2% over the forecast horizon. The economic recovery and fiscal consolidation
measures are projected to reduce the deficit from 4.4% in 2024 to 3.4% by 2026. The public debt-
to-GDP ratio is set to increase to 87.5%.

Exiting a two-year recession

In 2023 and 2024, real GDP contracted by 1% and 0.1% respectively, dragged down by
investment, especially in construction. The decline in the construction sector, however, seems to
have bottomed out in 2024, as interest rates began to decrease. Private consumption remained
subdued as consumers postponed major purchases in a context of rising unemployment. At the
same time, exports of services grew strongly and compensated for losses in exports of goods.
Overall export growth was just above zero for the second year in a row. With imports declining, net
exports actually supported growth, as did government consumption.
At the beginning of 2025, data on production and Graph III.20.1: Finland - Real GDP growth and contributions
some sentiment indicators pointed to a continued
5 pps. forecast
recovery. Rising incomes driven by wages 4
increases are expected to stimulate private 3
consumption. Moreover, public investment is set 2
1
to be boosted by purchases of military equipment 0
in 2025 and 2026. However, the geopolitical -1
uncertainty, planned reductions in social benefits, -2
-3
and weaknesses in the labour market are set to
-4
have a negative effect. -5
-6
In particular, trade policy uncertainty is expected 17 18 19 20 21 22 23 24 25 26
to make corporations rethink their investment Net exports Investment Priv. consumption
plans. Increases in tariffs are also projected to
Gov. consumption Inventories Real GDP (y-o-y%)
take a toll on exports, though exports of services
to the US are projected to continue contributing
positively to growth over the forecast years. In addition, Finland is expected to deliver a large
cruise ship which significantly adds to exports in 2025. In 2026, supportive financing conditions
and receding uncertainty are expected to support a stronger recovery.
Overall, real GDP growth is projected to reach 1.0% and 1.3% in 2025 and 2026, respectively.

Rise in unemployment coming to a halt

In a context of weak economic activity, the unemployment rate reached 8.4% in 2024 and stood
close to 9% in the beginning of 2025. Major improvements in the labour market seem to be
unlikely given the high uncertainty in the short term. Still, the economic recovery should support
employment over the forecast period. In recent years, an increase in immigration has helped to
somewhat mitigate the decline in the working-age population, which will be important to bolster
labour supply as the economic situation improves. The recently negotiated wage increases exceed
projected inflation, supporting real disposable income over the forecast horizon.

Price pressures receding despite VAT hike

HICP inflation declined significantly in 2024 as energy prices decreased. Prices of unprocessed
food also decreased, following a surge in 2022 and 2023. However, an increase in the standard
VAT rate to 25.5% - in force since September 2024 – pushed inflation higher in the last quarter of
2024 with a positive carry-over effect into 2025. Nonetheless, lower prices of non-energy
industrial goods, further decreases in energy prices and moderating services inflation are expected

128
 Euro Area Member States, Finland

to exert downward pressure on overall inflation. HICP inflation is projected to reach 1.7% in 2025
before declining to 1.5% in 2026.

Fiscal consolidation set to reduce deficit

The general government deficit increased from 3.0% in 2023 to 4.4% of GDP in 2024. This steep
increase was due to a sustained growth in expenditure, coupled with a slower rise in revenues. The
latter was related to cuts in social security contributions and adverse macroeconomic conditions
which reduced both income and product tax receipts. Growth in expenditure was largely driven by
rising social security payments and public investment.
In 2025, the general government deficit is expected to decline to 3.7%, driven by the consolidation
measures adopted in April 2024. Key revenue-enhancing measures include the aforementioned
increase in VAT rates and higher sickness-related social security contributions, while reductions in
government intermediate consumption are expected to slow down expenditure growth. Cuts to
social benefits and the freeze of the indexation of social benefits adopted in 2023 are expected to
show their effect in 2025 as well. In 2026, the economic recovery is projected to add a cyclical
boost to revenues, partly offset by tax cuts decided in April 2025 while the delivery of further
military equipment is set to increase expenditure. Overall, in 2026, the general government deficit
is forecast to decrease to 3.4%.
The debt-to-GDP ratio reached 82.1% in 2024 and is forecast to increase further to 85.6% in
2025 and 87.5% in 2026, due to persistent (albeit declining) deficits.

Table III.20.1: Main features of country forecast - FINLAND

2024 Annual percentage change

bn EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 276.2 100.0 0.8 2.7 0.8 -0.9 -0.1 1.0 1.3
Private Consumption 143.1 51.8 1.0 3.2 0.9 0.0 -0.1 0.5 1.6
Public Consumption 71.9 26.0 1.0 4.3 -0.6 3.4 0.7 -0.2 -0.1
Gross fixed capital formation 59.4 21.5 1.1 1.8 1.5 -7.4 -7.1 3.5 3.0
Exports (goods and services) 115.1 41.7 1.8 6.0 4.4 0.2 0.1 2.5 2.4
Imports (goods and services) 113.3 41.0 2.5 7.0 9.3 -6.7 -2.4 2.6 2.9
GNI (GDP deflator) 277.1 100.3 0.9 2.8 0.0 -1.6 -0.1 1.0 1.3
Contribution to GDP growth: Domestic demand 1.0 3.1 0.7 -1.0 -1.5 1.0 1.5
Inventories 0.0 0.0 2.0 -3.0 0.6 0.0 0.0
Net exports -0.2 -0.3 -1.9 3.3 1.1 0.0 -0.2
Employment 0.5 2.3 3.5 0.9 -0.6 0.2 0.5
Unemployment rate (a) 8.0 7.7 6.8 7.2 8.4 8.6 8.3
Compensation of employees / head 2.0 4.1 2.5 3.4 0.5 2.3 2.3
Unit labour costs whole economy 1.7 3.7 5.3 5.3 0.1 1.5 1.5
Saving rate of households (b) 9.0 12.5 10.0 10.2 9.8 9.0 9.0
GDP deflator 1.7 2.5 6.2 3.5 1.4 1.8 1.7
Harmonised index of consumer prices 1.5 2.1 7.2 4.3 1.0 1.7 1.5
Terms of trade goods -0.3 0.5 0.7 -2.4 -2.5 0.5 0.5
Trade balance (goods) (c) 3.0 0.9 -0.1 3.3 2.5 2.4 2.3
Current-account balance (c) 0.3 0.3 -2.4 -0.6 -0.8 -0.7 -0.7
General government balance (c) -0.6 -2.7 -0.2 -3.0 -4.4 -3.7 -3.4
Fiscal stance (c) 0.2 0.2 0.5 -2.1 -0.6 0.6 0.5
Structural budget balance (d) -1.6 -2.5 0.1 -1.7 -2.7 -2.3 -2.5
General government gross debt (c) 55.8 73.2 74.0 77.5 82.1 85.6 87.5
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
Note : Contributions to GDP growth may not add up due to statistical discrepancies.

129
Non-EA Member States
 21. BULGARIA

Real GDP growth is forecast to slow down to 2% in 2025 and 2.1% in 2026, due to both external
and domestic factors. Private consumption is set to grow more moderately on account of
temporarily higher inflation and precautionary savings. The outlook for exports has also been
revised downwards, reflecting subdued external demand and increased competition on external
markets. Private investment is projected to contract, while public investments would be supported
by intensified EU funds absorption. Wage growth is expected to moderate and annual inflation to
fall gradually after the increase at the beginning of 2025. The general government deficit for
2025 is projected to decrease to 2.8% and to remain constant in 2026. The debt-to-GDP ratio is
set to increase to 25.1% and 27.1% in 2025 and 2026 respectively.

Lower GDP growth due to external and domestic factors

Economic growth accelerated to 2.8% in 2024, driven by private consumption, which was
underpinned by higher real wages, employment gains and increased social transfers. Exports of
goods and services contracted, weighed down by the Russian war of aggression, with combined
nominal goods exports to Ukraine and the Russian Federation contracting by around one third
compared to the previous year. Lower demand for Bulgarian goods from China and the UK also
contributed to the decline in nominal exports. Investment declined by 1.1% due to lower public
spending, while firms accumulated more inventories.
For 2025, increased indirect taxes, higher prices Graph III.21.1: Bulgaria - Real GDP growth and contributions
for electricity, utilities and food, and hikes in
international tariffs are set to weigh on the 10 pps. forecast
economic outlook. Private consumption is set to 8
grow more moderately than in 2024, constrained 6
by temporarily higher inflation and precautionary 4
savings. The outlook for exports has also been 2
revised downwards but is expected to still turn 0
positive in 2025, due to positive growth in the -2
first quarter, and to accelerate moderately in -4
2026. Exports of goods in 2025 are also affected -6
17 18 19 20 21 22 23 24 25 26
by planned maintenance works in the steel
Net exports Investment Priv. consumption
production and oil refining sectors. Private
Gov. consumption Inventories Real GDP (y-o-y%)
investment is projected to contract in 2025 and
2026 due to the heightened economic
uncertainty. The projected acceleration in the absorption of EU funds is expected to support a
moderate investment growth that accelerates in 2026. Overall, real GDP is forecast to grow by 2%
in 2025 and by 2.1% in 2026.

Moderation in wage growth while unemployment remains low

In 2024 the labour market remained tight, with an unemployment rate at around 4%. Nominal
growth in compensation per employee slowed from 13.8% in 2024-Q1 to 4% in 2024-Q4, as
inflation pressures subsided, and firms aimed to curb costs. Wage moderation in the private sector
is expected to continue, accompanied by limited job losses related to the worsened economic
environment and the need to preserve competitiveness. Public wages are projected to grow
strongly in 2025, amid solid hiring.

Disinflation after the price increases at the beginning of 2025

HICP inflation slowed to 2.6% in 2024. The price hikes at the beginning of 2025 were due to
restored higher VAT rates on bread and restaurants, higher excise duties on tobacco, increased
electricity, gas, other utilities and administered prices and higher food prices. Inflation
developments for the rest of 2025 and in 2026 are also set to be driven by both external and

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 Non-EA Member States, Bulgaria

domestic factors. The higher inflation in domestic food prices at the beginning of 2025 is expected
to decelerate gradually, following broadly the international developments. The pass-through of
lower futures’ prices into retail energy and non-energy industrial goods prices is projected to keep
inflation down. The disinflation in the services sector is set to benefit from wage moderation and
the need to preserve competitiveness for exported services in a worsened external environment.
Overall, HICP inflation is projected at 3.6% in 2025 and 1.8% in 2026.

General government deficit remains within 3%

The general government deficit rose to 3% of GDP in 2024. In line with policy changes legislated in
2022, permanent increases in pensions and wages, compounded by higher social benefits,
continued to impact expenditure. The one-off statistical recording of settled liabilities for road
infrastructure works from 2020-21 contributed 0.5% of GDP to the increase.
For 2025, the deficit is expected to decrease to 2.8%. Further increases in social spending and
public sector salaries are planned, particularly in sectors such as defence. Public investment is set
to increase in 2025, in line with the efforts to advance the implementation of the RRP amid severe
delays and also due to the expected deliveries of military equipment. The stimulus to economic
activity from public investment is expected to have a positive impact on revenues. A positive
contribution is also expected from measures such as increases in excise duties on tobacco
products, the reinstatement of standard VAT rates for bread and restaurant services, a 100%
dividend policy on state-owned enterprises and from measures to fight tax evasion and avoidance.
In 2026, the deficit is expected to remain at 2.8% of GDP. Growth in expenditure on public sector
salaries, pensions and social benefits is set to decelerate while revenues, including social
contributions, are set to benefit from wage increases in the private sector.
The general government debt-to-GDP ratio is forecast to increase from 24.1% in 2024 to 25.1% in
2025 and further up to 27.1% by 2026, driven by a stable primary deficit above 2% and sustained
disinflation. Risks to the fiscal outlook of Bulgaria are still tilted to the downside, as permanent
increases in public sector wages and pensions are not fully compensated, and due to the potential
impact of planned recapitalisations of state-owned enterprises.

Table III.21.1: Main features of country forecast - BULGARIA

2024 Annual percentage change

bn BGN Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 202.9 100.0 2.5 7.8 4.0 1.9 2.8 2.0 2.1
Private Consumption 116.9 57.6 3.0 8.5 3.9 1.4 4.2 3.5 2.5
Public Consumption 39.9 19.7 1.7 0.5 8.0 1.1 4.6 0.3 1.9
Gross fixed capital formation 36.4 17.9 2.5 -8.3 6.5 10.2 -1.1 2.0 3.5
Exports (goods and services) 113.2 55.8 4.9 11.6 12.1 0.0 -0.8 1.6 2.1
Imports (goods and services) 108.5 53.5 4.8 10.7 15.3 -5.5 1.3 2.4 2.8
GNI (GDP deflator) 193.3 95.3 2.2 7.4 2.5 2.3 3.2 2.2 2.3
Contribution to GDP growth: Domestic demand 2.9 3.5 4.8 2.8 3.1 2.4 2.5
Inventories 0.0 3.5 0.8 -4.6 1.0 0.0 0.0
Net exports -0.4 0.8 -1.6 3.8 -1.3 -0.4 -0.3
Employment 0.0 0.1 1.1 1.1 1.1 0.4 0.3
Unemployment rate (a) 9.5 5.2 4.2 4.3 4.2 4.0 3.8
Compensation of employees / head 8.6 11.3 14.2 13.4 10.4 9.6 6.1
Unit labour costs whole economy 5.9 3.3 10.9 12.5 8.5 7.8 4.2
Saving rate of households (b) -3.0 -5.6 -6.6 -5.5 -4.9 -3.2 -1.5
GDP deflator 4.4 7.0 15.9 8.0 6.5 5.4 2.5
Harmonised index of consumer prices 2.9 2.8 13.0 8.6 2.6 3.6 1.8
Terms of trade goods 2.0 0.3 2.4 -2.4 -0.8 -0.4 0.7
Trade balance (goods) (c) -10.7 -4.0 -5.9 -4.1 -5.2 -5.3 -5.3
Current-account balance (c) -4.7 -0.2 -2.6 0.7 -0.8 -1.1 -1.0
General government balance (c) -0.7 -4.0 -3.0 -2.0 -3.0 -2.8 -2.8
Fiscal stance (c) 0.6 -1.1 -1.3 1.1 -0.2 -1.1 0.8
Structural budget balance (d) 0.0 -4.0 -3.5 -2.8 -2.7 -3.2 -2.7
General government gross debt (c) 20.5 23.8 22.5 22.9 24.1 25.1 27.1
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
Note : Contributions to GDP growth may not add up due to statistical discrepancies.

133
 22. CZECHIA

Czechia’s economy resumed its expansion in 2024 with real GDP growth at 1.1% and forecast to
accelerate to 1.9% in 2025 and 2.1% in 2026. Growth is expected to be driven primarily by
domestic demand, while the external environment remains challenging. The resumption of growth
in real wages helped households’ consumption re-emerge as the main driver of economic activity,
despite still depressed consumer confidence. With ongoing trade wars and an economic slowdown
expected for Czechia’s main trading partners, net exports are forecast to contribute negatively to
growth. Headline inflation is projected at 2.2% in 2025, with services contributing the most and
negative energy inflation offsetting the growth in food prices. A forecasted broad-based decline in
inflationary pressures leads to headline inflation dropping to 2.0% in 2026. After the phase-out of
energy-related measures and the government’s public finance consolidation package in 2024,
public finances are set to stay in deficit at around 2.3% in 2025 and 2.2% in 2026.

Economic activity driven by internal demand

Czechia’s real GDP grew by 1.1% in 2024 driven Graph III.22.1: Czechia - Real GDP growth and contributions
by both domestic and external demand. GDP
8 pps. forecast
growth is set to accelerate in 2025 and 2026
6
with households’ consumption and investment
4
activity contributing positively and the
contribution from net exports turning negative. 2

Household consumption was the main engine of 0

GDP growth in the last two quarters of 2024. -2

While consumer confidence is still affected by -4

perceived risks of economic and income growth -6
uncertainty, household consumption resumed -8
17 18 19 20 21 22 23 24 25 26
growth from a low base, propelled by real wage
increasing again in 2024. As purchasing power Net exports Investment Priv. consumption

has been eroded by high inflation in 2022-23, Gov. consumption Inventories Real GDP (y-o-y%)

household consumption volume is still below

2019 levels, with bigger gaps persisting in housing, water and electricity expenditures or in
restaurants and accommodation services. Saving rates are expected to moderate in the forecast
horizon but otherwise remain high from historical perspective. They are also skewed towards
higher-income households who gained the most from the permanent cut in personal income tax
effective from 2021 and who have a lower propensity to consume. Despite contracting in 2024,
investment is set to resume growth in 2025 and 2026, due to an assumed increased absorption of
EU funds, a recovery in the residential construction and FDIs (e.g. a potential significant investment
in a new semiconductors manufacturing facility).
Rising trade restrictions affect the Czech economy mostly indirectly via the exposure of Czech
automotive components producers to the main trading partner Germany and are set to weigh on
the dynamics of exports’ growth. Driven by strong internal demand, imports look set to grow faster
than exports and result in a negative contribution of net exports to economic growth. Risks remain
to the downside due to the high degree of trade openness of the Czech economy.

Labour market remains tight

Despite the acceleration of economic growth, the unemployment rate is expected to remain stable
at 2.6% for the coming two years, one of the lowest in the EU. Recent structural changes in the
Czech economy are also reflected in employment, with declining employment in manufacturing,
offset by rising employment in services. Nominal wage growth surpassed inflation in 2024 and
reached 5.9% and is forecast to continue at 6.5% in 2025 and 5.3% in 2026.

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 Non-EA Member States, Czechia

Inflation on a downward path

HICP headline inflation has slowed down to 2.7% in 2024 and is expected to remain low at 2.2% in
2025 and slow further to 2.0% in 2026. Food inflation accelerated in the first months of 2025,
propelled by agricultural commodity prices, and is set to add to consumer price pressures in 2025.
On the contrary, energy is set to contribute negatively to inflation in 2025 as energy wholesale
prices are declining. Services inflation is set to be the highest contributor driven by wage growth.
HICP inflation excluding energy, food, alcohol and tobacco is projected above headline inflation at
2.4% in 2024 and 2.2% in 2025.

Czechia’s public finances still in deficit

Czechia’s general government deficit dropped markedly to 2.2% of GDP in 2024, on the back of
the phase-out of energy-related measures and of the government consolidation package that
further decreased expenditure and increased revenue. The drop in expenditure as a share of GDP
was exacerbated by the reduction of government subsidies to renewable energy sources. After a
peak in 2023 due to the completion of projects financed by EU structural funds, public investment
decreased in 2024 as percentage of GDP.
The budget deficit is set to stay broadly unchanged at 2.3% of GDP in 2025, with a risk of
slippages in view of the upcoming general elections in autumn. The expenditure share in GDP is
forecast to stay unchanged, as higher employees’ pay and increased government subsidies to
renewable energy sources are compensated by higher GDP growth. Revenue is set to be supported
by higher social security contributions on account of higher contribution rates, while the growth of
taxes on income and wealth is projected to decrease.
Based on unchanged policies, the deficit is expected to decrease to 2.2% in 2026. The revenue-to-
GDP ratio is projected to decline, mainly due to the phase-out of the tax on the windfall profits of
energy companies. Nonetheless, the expenditure-to-GDP ratio is forecast to decline even faster, as
spending on social benefits and public investment is expected to grow slower than GDP.
Public debt remains low compared to the EU average. The public debt-to-GDP ratio is forecast to
rise from 43.6% in 2024 to 45.4% in 2026, driven by the negative headline balance, partly offset
by nominal GDP growth.

Table III.22.1: Main features of country forecast – CZECHIA

2024 Annual percentage change

bn CZK Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 8010.7 100.0 2.2 4.0 2.8 -0.1 1.1 1.9 2.1
Private Consumption 3788.6 47.3 1.8 4.2 0.5 -2.8 2.2 3.3 3.0
Public Consumption 1610.2 20.1 1.3 1.5 0.4 3.4 3.3 2.4 2.2
Gross fixed capital formation 2096.1 26.2 2.1 6.7 6.3 2.5 -1.2 0.6 3.2
Exports (goods and services) 5546.5 69.2 5.3 8.2 5.1 2.7 1.8 1.1 2.4
Imports (goods and services) 5020.8 62.7 4.6 13.7 5.9 -0.9 0.9 2.5 3.6
GNI (GDP deflator) 7659.1 95.6 2.2 6.5 1.6 2.7 -1.9 1.9 2.2
Contribution to GDP growth: Domestic demand 1.7 4.0 2.0 0.0 1.3 2.2 2.7
Inventories -0.1 2.8 1.2 -2.7 -0.9 0.6 0.0
Net exports 0.6 -2.8 -0.3 2.6 0.7 -0.8 -0.6
Employment 0.5 1.0 1.0 1.0 0.3 0.4 0.2
Unemployment rate (a) 5.3 2.8 2.2 2.6 2.6 2.6 2.6
Compensation of employees / head 4.1 6.2 6.9 6.7 5.9 6.5 5.3
Unit labour costs whole economy 2.4 3.1 5.0 7.9 5.0 4.9 3.4
Saving rate of households (b) 12.4 19.6 18.2 19.4 18.4 17.7 17.4
GDP deflator 1.8 4.0 8.7 8.1 4.0 2.9 2.8
Harmonised index of consumer prices 2.1 3.3 14.8 12.0 2.7 2.2 2.0
Terms of trade goods -0.2 -0.1 -4.2 3.3 1.3 0.9 0.8
Trade balance (goods) (c) 2.8 1.7 -0.3 3.9 5.2 4.9 4.6
Current-account balance (c) -2.3 -0.5 -4.3 2.6 1.2 0.8 0.5
General government balance (c) -1.9 -5.0 -3.1 -3.8 -2.2 -2.3 -2.2
Fiscal stance (c) -0.4 -1.4 -0.2 0.4 2.4 0.1 -0.1
Structural budget balance (d) -0.7 -4.7 -3.3 -3.2 -1.6 -1.7 -2.0
General government gross debt (c) 34.8 40.7 42.5 42.5 43.6 44.5 45.4
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

135
 23. DENMARK

The Danish economy is forecast to withstand current geopolitical uncertainties and expand
further in 2025 and 2026, driven by industrial production in combination with renewed North
Sea energy extraction. Unemployment is set to rise marginally from present levels. Public
finances are robust, with continued, albeit declining, general government surpluses in both
2025 and 2026.

Economic expansion driven by exports as domestic demand picks up too

The Danish economy enjoys strong industrial Graph III.23.1: Denmark - Real GDP growth and contributions
production expansion, driven in part by the
8 pps.
pharmaceutical sector. Net exports have been forecast

the main driver behind growth thanks to strong 6

exports of pharmaceutical and other industrial
4
production. Expansion in the economy was
particularly strong in the last quarter of 2024, 2

resulting in an annual growth rate of 3.7% for the 0

year. The carry-over for 2025 is of more than
2% annual growth. Furthermore, the full -2
reopening of gas extraction from the North Sea in -4
early 2025 should add to the economic 17 18 19 20 21 22 23 24 25 26

expansion, as well as making Denmark more than Net exports Investment Priv. consumption
self-sufficient with natural gas. Notwithstanding Gov. consumption Inventories Real GDP (y-o-y%)
the current geopolitical and trade uncertainties,
Denmark enjoys a still positive growth outlook for 2025. Private and public consumption as well as
investments, helped by lower interest rates, increasingly take over as the main factors behind
economic growth. Real wage increases are boosting household real incomes, which are projected to
translate into higher consumption for both this year and next notwithstanding current weak
consumer confidence. Overall, real GDP is forecast to grow by 3.6% in 2025, easing to a rate of
2.0% in 2026.

Labour market pressures easing

Employment is expected to rise modestly over the forecast horizon, as opposed to the markedly
stronger increases in recent years. As the labour force continues to expand with higher
participation of older workers and international labour, the number of unemployed persons is
projected to increase slightly in both 2025 and 2026 (66). The unemployment rate is set to increase
from 6.2% in 2024 and 2025 to 6.3% in 2026. While still prevalent in some key sectors, notably
ICT, healthcare and construction, labour market bottlenecks appear to be easing. Both nominal and
real wages are expected to continue growing in 2025 and 2026 but based on concluded collective
agreements the increases are expected to be lower than in the previous two years.

Uncertain outlook for exports

Foreign trade is likely to be marked by ongoing geopolitical and customs tariff uncertainties. Still,
the forecast is for continued strong growth in exports and imports of goods in 2025, while the
trade in goods could decelerate somewhat in 2026. Trade in services is projected to be more
subdued in both years as lower global trade growth impacts the shipping industry. In 2024 and
preceding years, Danish growth was predominantly driven by net exports, but this is expected to
change over the forecast period, as the growth contribution from net exports dissipates towards
2026. Increased tariffs and increasing fragmentation of global trade are key risks to the outlook as
it may result in more difficult sales opportunities for Danish export companies, potentially leading
(66)
A data break implies a marked increase in the unemployment rate from 2023 to 2024.

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 Non-EA Member States, Denmark

to a decline in exports. In particular, the increased importance of the pharmaceutical sector means
that any major swings in production and demand within this sector would have economy-wide
implications. Volatility in sea freight rates, as witnessed over the past years, could also impact the
foreign trade balance and the balance of payments significantly.

Inflation to remain below 2%

Headline inflation has been increasing since a low point reached in spring 2024, driven by higher
energy and food inflation. In contrast, non-energy industrial goods inflation and service inflation
have decreased markedly over the year. Looking ahead, headline inflation is set to rise from 1.3%
in 2024 to 1.6% in 2025 and 1.5% in 2026, as falling commodity prices, low non-energy industrial
goods inflation and slowing wage growth contribute to a stable inflation outlook.

Strong government finances

Denmark recorded a general government surplus of 4.5% of GDP in 2024, driven by higher tax
revenues due to strong personal income tax, business tax and unexpectedly high pension yield tax
revenues. The forecast is for continued, albeit declining, general government surpluses in 2025 of
1.5% of GDP and 2026 of 0.6%, as government expenditures outgrow increases in revenues. This
reflects inter alia plans for a continued marked increase in military expenditures. This includes a
2025-2026 “Acceleration Fund” for military equipment totalling up to 1.6% of GDP, of which a
significant share is expected to materialise in 2025-2026 as well as continued donations to
Ukraine. Slightly higher unemployment should also contribute to higher social expenditures.
Continued government surpluses and significant denominator effects, only partly countered by
stock-flow effects, are expected to bring the gross debt level to 29.7% of GDP in 2025 and further
down to 29.4% in 2026.

Table III.23.1: Main features of country forecast – DENMARK

2024 Annual percentage change

bn DKK Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 2960.9 100.0 1.1 7.4 1.5 2.5 3.7 3.6 2.0
Private Consumption 1332.0 45.0 1.3 6.8 -2.1 1.4 0.9 1.6 1.7
Public Consumption 668.2 22.6 1.1 4.9 -2.5 0.2 1.4 4.4 2.1
Gross fixed capital formation 657.6 22.2 1.9 9.8 2.8 -6.6 2.7 2.4 2.5
Exports (goods and services) 2064.5 69.7 2.8 8.8 7.2 10.4 7.5 5.4 2.5
Imports (goods and services) 1744.4 58.9 3.5 9.5 4.4 3.7 3.0 4.0 2.6
GNI (GDP deflator) 3062.3 103.4 1.3 8.1 0.8 2.2 4.3 3.6 2.0
Contribution to GDP growth: Domestic demand 1.3 6.6 -0.9 -0.9 1.4 2.2 1.8
Inventories 0.0 0.6 0.6 -1.7 -1.0 -0.1 0.0
Net exports -0.2 0.2 1.9 5.1 3.3 1.4 0.2
Employment 0.5 2.3 4.0 1.3 0.8 0.5 0.0
Unemployment rate (a) 5.9 5.1 4.5 5.1 6.2 6.2 6.3
Compensation of employees / head 2.3 3.1 2.6 3.1 4.4 3.9 2.9
Unit labour costs whole economy 1.8 -1.8 5.0 1.9 1.5 0.8 1.0
Saving rate of households (b) 5.9 5.8 9.7 9.7 9.1 11.5 11.7
GDP deflator 1.7 2.8 9.1 -3.8 1.8 1.7 1.9
Harmonised index of consumer prices 1.3 1.9 8.5 3.4 1.3 1.6 1.5
Terms of trade goods 0.8 -4.7 -7.7 1.7 -1.0 0.5 -0.1
Trade balance (goods) (c) 3.9 3.3 2.8 7.4 9.4 10.4 10.4
Current-account balance (c) 5.8 8.7 11.7 9.8 13.0 13.7 13.5
General government balance (c) 1.0 4.1 3.4 3.3 4.5 1.5 0.6
Fiscal stance (c) 0.5 2.6 1.2 -1.8 0.5 -2.6 -0.7
Structural budget balance (d) 1.6 4.3 4.4 4.6 5.6 1.3 0.4
General government gross debt (c) 42.0 40.5 34.1 33.6 31.1 29.7 29.4
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

137
 24. HUNGARY

GDP is projected to grow at 0.8% in 2025 and to pick up to 2.5% in 2026, supported by
consumption and a gradual recovery of investment and exports. Although inflation has decreased
from very high levels, underlying inflationary pressures remain strong. After a significant correction
in 2024, the general government deficit is projected to remain elevated at 4.6% this year. The
debt-to-GDP ratio is expected to increase to reach 74.1% this year.

The economic recovery is facing headwinds

Real GDP grew by 0.5% in 2024, benefitting from steady consumption bolstered by substantial
wage increases and a decline in households’ savings. By contrast, investment declined, due to an
uncertain business environment and cuts in public investment. Exports remained sluggish due do
the weak performance of machinery and vehicle exports. Economic activity declined in 2025 Q1 by
an estimated 0.2% q-o-q, partly owing to a decline in industrial production.
GDP growth is forecast to reach 0.8% in 2025 Graph III.24.1: Hungary - real GDP growth and contributions
and 2.5% in 2026. Private consumption is
8 pps. forecast
expected to remain the key growth driver,
6
supported by real income growth, as well as
4
higher personal income tax exemptions and
2
allowances. Investment, particularly by
0
corporations, is expected to be limited in 2025
-2
but is set to rebound in 2026 as the headwinds
-4
from global trade uncertainties ease and
-6
government-supported construction picks up.
-8
Exports are projected to recover, driven by 17 18 19 20 21 22 23 24 25 26
improving demand and new production capacity
Net exports Investment Priv. consumption
in FDI-funded facilities. Higher domestic demand
Gov. consumption Inventories Real GDP (y-o-y%)
is also set to boost imports and reduce the
current account balance while income outflows to
the rest of the world are assumed to remain low.
Risks to the outlook include subdued external demand, which is particularly important given
Hungary’s trade exposure and deep integration into global supply chain in key sectors, as well as
inflationary pressures, which have been exacerbated by high wage increases and other
government-funded policy measures.

The labour market is expected to remain tight overall

The unemployment rate increased to 4.5% in 2024, while the number of job vacancies fell. A
gradual economic recovery is expected to take place and lower the unemployment rate to around
4.3% by 2026. Nominal wage growth is set to remain elevated in 2025 and 2026, driven by a
further 9% minimum wage increase in 2025, the tight labour market, wage hikes in the public
sector.

Inflationary pressures persist

HICP inflation averaged 3.7% in 2024, with HICP inflation excluding energy and food reaching
5.9%. Inflation increased in 2025 Q1 due to excise duty hikes, a rebound in food inflation and
persistent momentum in services inflation. Domestic demand and rising food prices are expected
to keep inflation elevated in 2025. Although price regulations and negotiations between the
government and major service providers are set to moderate inflation temporarily, prices are likely
to adjust once those measures end in 2025 and 2026. Inflation is forecast to increase to 4.1% in
2025, before decreasing to 3.3% in 2026, driven by lower commodity and energy prices along with
somewhat easing wage pressures.

138
 Non-EA Member States, Hungary

The budget deficit is set to remain elevated

The budget deficit decreased from 6.7% of GDP in 2023 to 4.9% of GDP in 2024, driven mostly by
lower spending on energy subsidies and postponements in public investments. In 2025, the deficit
is projected to narrow further to 4.6%. Primary expenditure growth is set to remain high as a result
of public wage increases and growing operating expenditure. Interest expenditure is forecast to
decrease due to lower coupons on inflation-linked bonds, while energy subsidies are set to decline
further. Public investment is expected to stabilise after a large drop in 2024.
In 2026, the deficit is projected to increase slightly to 4.7% of GDP, driven by recent new policy
measures. Income taxes are set to decrease significantly due to the planned introduction of a
personal income tax exemption for mothers and an increase in the family tax allowance, totalling
an estimated 0.6% of GDP. These will be partially offset by the extension of sectoral taxes which
were due to expire in 2025. Public wage growth is set to remain high on account of bonuses for
military and law enforcement staff, estimated at 0.5% of GDP.
The fiscal outlook is surrounded by downside risks stemming from growth and domestic policy
uncertainties.
The debt-to-GDP ratio increased in 2024, in part due to a weakening of the forint and the
acquisition of the Budapest airport. It is projected to increase further to 74.5% of GDP in 2025 as
large cash interest payments accrued in previous year are due. It is projected to decline slightly in
2026.

Table III.24.1: Main features of country forecast – HUNGARY

2024 Annual percentage change

bn HUF Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 81514.2 100.0 1.7 7.2 4.3 -0.8 0.5 0.8 2.5
Private Consumption 41221.4 50.6 1.3 5.1 6.9 -1.0 5.1 3.4 3.2
Public Consumption 16513.9 20.3 1.4 2.0 3.2 3.3 -4.6 0.3 1.5
Gross fixed capital formation 19056.8 23.4 2.4 5.7 0.7 -7.7 -11.1 -1.5 4.0
Exports (goods and services) 60861.6 74.7 5.7 8.3 10.7 1.7 -3.0 0.2 2.8
Imports (goods and services) 56337.5 69.1 5.0 7.4 10.7 -3.4 -4.0 1.1 3.5
GNI (GDP deflator) 79500.0 97.5 1.9 6.3 4.6 -1.2 1.1 0.8 2.5
Contribution to GDP growth: Domestic demand 1.5 4.4 4.1 -2.0 -1.2 1.4 2.9
Inventories -0.4 1.9 0.2 -3.6 1.2 0.0 0.0
Net exports 0.6 0.8 0.0 4.8 0.6 -0.6 -0.4
Employment 0.7 1.8 1.5 0.3 0.1 0.1 0.3
Unemployment rate (a) 7.2 4.0 3.6 4.1 4.5 4.4 4.3
Compensation of employees / head 4.0 8.6 17.1 14.9 12.6 8.7 7.8
Unit labour costs whole economy 3.0 3.2 14.0 16.2 12.2 7.9 5.5
Saving rate of households (b) 12.7 19.1 16.9 20.0 18.0 17.4 17.1
GDP deflator 3.7 6.2 14.2 15.2 7.3 4.9 3.6
Harmonised index of consumer prices 3.4 5.2 15.3 17.0 3.7 4.1 3.3
Terms of trade goods -0.1 -3.7 -6.9 6.3 0.6 0.6 0.2
Trade balance (goods) (c) 0.4 -2.9 -9.2 -0.2 0.7 0.2 -0.1
Current-account balance (c) -1.5 -3.9 -8.4 0.5 2.4 2.0 1.5
General government balance (c) -4.1 -7.1 -6.2 -6.7 -4.9 -4.6 -4.7
Fiscal stance (c) -0.6 -2.8 -1.4 3.8 3.3 -0.4 -1.0
Structural budget balance (d) -3.4 -7.4 -7.3 -6.6 -4.5 -4.0 -4.7
General government gross debt (c) 73.0 76.2 73.9 73.0 73.5 74.5 74.3
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

139
 25. POLAND

Economic growth in Poland is set to remain robust in 2025 and 2026, supported by strong private
consumption and investment, while net exports are expected to be a drag on the economy.
Inflation eased in 2024 and is forecast to continue moderating in 2025 and 2026. In spite of the
deterioration of the general government deficit in 2024, a gradual fiscal consolidation is expected
in 2025 and 2026.

Growth to remain robust in 2025 and 2026

In 2024, real GDP grew by 2.9%, broadly in line with the Autumn Forecast. Private consumption
supported economic growth, underpinned by rising real wages, increased government spending on
benefits for families and receding inflationary pressures. Net exports posed a drag on growth.
Total investment declined due to a contraction of construction investment.
In 2025, real GDP is forecast to increase by 3.3%. Graph III.25.1: Poland - Real GDP growth and contribution
Private consumption is set to remain the key
10 pps. forecast
driver of growth as real disposable income
8
continues to rise robustly. Following the decline in
6
2024, investment growth is set to pick up 4
strongly mainly due to higher EU-funded public 2
investment. The negative contribution from net 0
exports registered in 2024 is expected to narrow -2
somewhat. -4
-6
In 2026, economic growth is projected to reach
-8
3%. The contribution from private consumption is 17 18 19 20 21 22 23 24 25 26
set to remain strong, but decrease compared to Net exports Investment Priv. consumption
the previous year as real disposable income
Gov. consumption Inventories Real GDP (y-o-y%)
growth is projected to slow further. The positive
contribution from investment to growth reflects
the absorption of EU funds, in particular in the final year of RRF implementation, supporting
investment by public and private sector. The negative contribution from net exports is projected to
shrink further as exports recover.
Risks to the outlook relate mainly to delays in the implementation of public investment and, on the
upside, a faster growth of private consumption given the assumed relatively high savings rate by
households as observed in 2024.

Labour market stable

Employment fell in 2024 but is projected to remain broadly stable in 2025 and pick up in 2026.
While demand for labour recovers with increasing economic growth, the population of working age
is set to continue shrinking due to aging. After having reached a historic high in 2024, the activity
rate is projected to continue increasing in 2025 and 2026. The unemployment rate is therefore set
to remain broadly stable and reach 2.8% in 2026. Growth in nominal compensation per employee
is expected to slow from 12.3% in 2024 to 6.2% in 2025 and to 4.8% in 2026 as inflation
moderates and minimum wage increases less than in 2023 and 2024.

Inflation easing slowly

HICP inflation decreased to 3.7% in 2024 and is projected to edge down to 3.6% in 2025. The
forecast factors in the legislated changes in energy support in the second half of 2025, but the
impact is set to be limited by the recent sharp correction in energy commodity prices. Inflation in
services is projected to ease only gradually reflecting continued wage pressures. Headline inflation
is forecast to moderate to 2.8% in 2026 benefiting from a projected decrease in energy inflation
and weak growth in imported non-energy goods prices.

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 Non-EA Member States, Poland

Gradual fiscal consolidation

The general government deficit turned out at 6.6% of GDP in 2024, compared to the Autumn
Forecast’s projection of 5.8% of GDP. The increase was partially due to tax revenues rising well
below economic activity. Higher public consumption, including growth of salaries of the public
sector employees, as well as higher than estimated defence investments, also contributed to the
higher deficit.
In 2025, public spending is set to remain high, driven by increasing defence spending, investments,
social benefits and interest expenditure. Total public investment expenditure is expected to exceed
5% of GDP, resulting from accelerated military equipment deliveries and substantial investments
in transport and energy infrastructure. The indexation of pensions and new social benefits,
including the ‘Active Parent’ programme, social contribution holidays for entrepreneurs and the
widow’s pension, are also set to increase government expenditure. Interest expenditure is expected
to rise due to growing public debt. Spending on healthcare is also set to increase further in relation
to GDP. In contrast, measures announced in Poland's medium-term fiscal-structural plan, such as
excise duty hikes and non-indexation of personal income tax brackets, are expected to increase
government revenues, supporting a gradual fiscal consolidation. The general government deficit is
projected to decrease to 6.4% of GDP in 2025.
In 2026, a continuation of the same trends is expected, before the adoption of the draft budget
which may specify further consolidation measures. Expenditures are expected to remain at a high
level, driven by broadly similar factors as in 2025. The revenue measures included in the medium-
term plan are set to provide for an additional increase in tax revenues. The general government
deficit is projected to further decrease to 6.1% of GDP.
The public debt-to-GDP ratio is expected to increase steadily, from 55.3% in 2024 to 58.0% in
2025 and 65.3% in 2026, driven by high deficits and stock-flow adjustments related to defence
investments and one-off transfers related to investments financed by RRF loans in 2026.

Table III.25.1: Main features of country forecast - POLAND

2024 Annual percentage change

bn PLN Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 3641.2 100.0 3.7 6.9 5.3 0.2 2.9 3.3 3.0
Private Consumption 2096.0 57.6 3.1 6.2 5.2 -0.3 3.0 3.4 2.8
Public Consumption 756.4 20.8 3.0 5.0 0.6 4.5 8.2 2.8 3.2
Gross fixed capital formation 614.8 16.9 4.9 1.5 1.7 12.7 -2.2 6.9 5.3
Exports (goods and services) 1905.4 52.3 6.6 12.3 7.4 3.7 2.0 1.6 2.3
Imports (goods and services) 1759.5 48.3 5.9 16.3 6.8 -1.5 4.2 3.0 3.1
GNI (GDP deflator) 3507.6 96.3 3.6 6.1 5.7 0.4 3.1 3.5 3.0
Contribution to GDP growth: Domestic demand 3.5 4.7 3.3 2.8 2.9 3.7 3.2
Inventories 0.0 3.4 1.4 -5.7 1.1 0.1 0.0
Net exports 0.2 -1.2 0.6 3.2 -1.1 -0.6 -0.2
Employment 1.3 2.9 1.1 0.1 -0.7 0.1 0.3
Unemployment rate (a) 8.7 3.4 2.9 2.8 2.9 2.8 2.8
Compensation of employees / head 4.6 4.7 12.3 14.4 12.3 6.2 4.8
Unit labour costs whole economy 2.2 0.8 7.9 14.2 8.3 2.9 2.0
Saving rate of households (b) 7.1 5.1 1.0 2.4 6.6 6.6 6.5
GDP deflator 2.2 5.3 10.7 9.9 3.6 4.2 3.1
Harmonised index of consumer prices 2.1 5.2 13.2 10.9 3.7 3.6 2.8
Terms of trade goods 0.7 -2.0 -3.7 1.7 -1.4 3.1 0.0
Trade balance (goods) (c) -2.3 -1.3 -3.3 0.6 -0.8 0.0 -0.2
Current-account balance (c) -3.0 -1.4 -2.9 1.8 0.2 1.0 0.7
General government balance (c) -3.7 -1.7 -3.4 -5.3 -6.6 -6.4 -6.1
Fiscal stance (c) 0.1 1.1 -3.2 -0.9 -1.8 -0.3 0.1
Structural budget balance (d) -2.4 -2.2 -4.5 -4.7 -6.1 -6.1 -6.1
General government gross debt (c) 50.7 53.0 48.8 49.5 55.3 58.0 65.3
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

141
 26. ROMANIA

After a lacklustre 2024, Romania’s economy was on course to pick up speed at the start of 2025,
due, in particular, to construction, agriculture and services, and better export prospects. However,
the uncertainties generated by the imposition of US tariffs, and also by heightened domestic
political and fiscal volatility are expected to dampen exports, economic sentiment, and ultimately
investment and consumption. This is expected to result in only moderate real GDP growth of 1.4%
in 2025 that is set to further strengthen to 2.2% in 2026. Inflation is projected to ease, but to
remain high, while unemployment is projected to decline marginally. The general government
deficit was 9.3% of GDP in 2024, fuelled by very large increases in public wages and pensions. It
is projected to decline modestly to 8.6% of GDP in 2025 and 8.4% in 2026, reflecting a package
of measures implemented at the end of 2024.

Modest pick-up in growth amid high uncertainty

Economic sentiment remained in positive territory at the beginning of 2025, despite economic
headwinds and persistent uncertainty. Construction, agriculture and transport services show
improved performance prospects, also helped by the Schengen membership and infrastructure
upgrades. A strong rebound in residential construction together with robust EU-funded investment
in public infrastructure bode well for a recovery in gross fixed capital formation, despite private
investment being negatively impacted by pronounced fiscal uncertainty and geopolitical volatility.
At the same time, high frequency indicators point to a deceleration of retail sales and private
consumption, as restrictive income policies and still high inflation are likely to depress growth in
disposable income.
While Romania has only limited trade with the USA, the US increase in tariffs is expected to limit
the recovery of Romania’s exports, in particular of manufactured goods, due to the negative
impact on Romania’s EU trading partners. The negative contribution of net exports to GDP growth
is forecast to drop in 2025 as deceleration in domestic demand lowers import growth, and
prospects for exports of services and agricultural products improved. Overall, real GDP growth is
projected to pick up only modestly to 1.4% in 2025, below potential.
In 2026, lower inflation and the easing of Graph III.26.1: Romania - Real GDP growth and contributions
monetary policy leading to more favourable
12 pps. forecast
financing conditions are expected to support
10
private consumption growth. Assuming that
8
political and fiscal uncertainty subsides, investor 6
confidence will strengthen, accelerating the 4
recovery in gross fixed capital formation. With 2
better growth prospects for EU trading partners, 0
exports are expected to gain further traction, but -2
the contribution of net exports to GDP growth is -4
projected to remain slightly negative. Overall, real -6
17 18 19 20 21 22 23 24 25 26
GDP growth is set to moderately strengthen to
2.2%. After a significant widening in 2024, the Net exports Investment Priv. consumption

current account deficit is projected to narrow Gov. consumption Inventories Real GDP (y-o-y%)

progressively, but remain at still high levels of

close to 8% of GDP in 2025 and 7% of GDP in 2026. Risks to the forecast are tilted to the
downside, in particular if domestic political and fiscal uncertainty persists and external demand
suffers a larger hit than estimated.

Wage increases to moderate over the forecast horizon

Labour market tensions have eased and employment growth is set to continue in both 2025 and
2026, primarily supported by more hirings in the private sector. The unemployment rate is
projected to decline further to close to 5% by end-2026. The double-digit growth in nominal wages

142
 Non-EA Member States, Romania

continued in 2024, affecting cost competitiveness, but the pace of wage increases is projected to
moderate significantly over the forecast horizon. A freeze in public wages was enacted in
December 2024 and the introduction of a minimum wage setting mechanism in February 2025 is
likely to contain further large increases in private sector wages.

Disinflation process to remain bumpy

After a notable decline in HICP inflation to 5.8% on average in 2024, disinflation is likely to
continue, but only slowly in 2025. Headline inflation excluding energy and foods, in particular of
services, remains sticky and the foreseen elimination of the cap on electricity prices for households
is expected to push up domestic energy prices. Conversely, the evolution of agri-food and
international energy prices may contribute to lowering inflation. Overall, average HICP inflation is
projected to decline marginally to around 5% in 2025 and follow a more pronounced downward
trend to below 4% in 2026.

Government deficit is projected to decline gradually in 2025 and 2026

Romania’s general government deficit reached 9.3% of GDP in 2024, fuelled by large increases in
public sector wages, interest payments, and pensions.
At the end of 2024, the parliament adopted a package of fiscal consolidation measures worth
around 2% of GDP. The package includes a nominal freeze in public wages and pensions, and
revenue measures amounting to 0.3% of GDP. As a result, the deficit is projected to decline to
8.6% of GDP in 2025 and, under unchanged policies, to 8.4% in 2026. This forecast does not
include the impact of the tax reform and other measures planned in Romania’s MTFSP, which if
properly designed and timely implemented have the potential to materially lower the deficit in
2025 and, to a greater extent, in 2026. Government debt is projected to increase from 48.9% of
GDP in 2023 to about 63% of GDP in 2026, mostly driven by high government deficits and a
projected increase in interest payments.

Table III.26.1: Main features of country forecast – ROMANIA

2024 Annual percentage change

bn RON Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 1760.1 100.0 3.1 5.5 4.0 2.4 0.8 1.4 2.2
Private Consumption 1117.4 63.5 4.3 7.0 5.1 3.0 6.0 2.0 2.3
Public Consumption 322.4 18.3 2.0 -0.6 -1.4 6.3 0.7 0.6 1.0
Gross fixed capital formation 451.7 25.7 5.2 4.0 5.4 14.5 -3.3 2.3 3.6
Exports (goods and services) 626.5 35.6 8.3 12.6 9.3 -0.8 -3.1 1.8 2.8
Imports (goods and services) 733.9 41.7 9.6 14.6 9.3 -1.1 3.8 2.9 3.2
GNI (GDP deflator) 1711.6 97.2 3.3 4.8 2.7 2.7 0.9 1.6 2.5
Contribution to GDP growth: Domestic demand 4.7 5.1 4.2 6.6 2.9 2.0 2.6
Inventories -0.3 1.8 0.3 -4.4 0.8 0.0 0.0
Net exports -1.2 -1.3 -0.5 0.2 -2.9 -0.6 -0.3
Employment -0.5 0.8 0.7 -1.5 1.8 0.6 0.7
Unemployment rate (a) 7.7 5.6 5.6 5.6 5.4 5.3 5.2
Compensation of employees / head 9.7 6.4 13.7 18.1 16.6 8.9 6.9
Unit labour costs whole economy 5.8 1.6 10.2 13.6 17.8 8.0 5.3
Saving rate of households (b) : : : : : : :
GDP deflator 6.4 5.6 12.1 12.8 8.8 6.5 5.8
Harmonised index of consumer prices 4.0 4.1 12.0 9.7 5.8 5.1 3.9
Terms of trade goods 1.8 0.9 -1.4 1.3 1.3 1.4 1.8
Trade balance (goods) (c) -8.8 -9.5 -11.4 -8.9 -9.3 -9.2 -8.7
Current-account balance (c) -4.5 -7.3 -9.6 -7.3 -8.5 -7.9 -7.0
General government balance (c) -3.9 -7.1 -6.4 -6.6 -9.3 -8.6 -8.4
Fiscal stance (c) -1.5 0.3 -0.9 0.4 -0.8 1.4 -0.1
Structural budget balance (d) -2.9 -6.4 -6.4 -6.4 -8.8 -7.9 -7.9
General government gross debt (c) 29.7 48.3 47.9 48.9 54.8 59.4 63.3
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
Notes: Due to a break in historical employment data in 2021, employment-related variables have been affected (employment, unemployment as well as
cyclically-adjusted and structural fiscal indicators).

143
 27. SWEDEN

Following a protracted period of weak growth, economic activity in Sweden is projected to

remain sluggish in 2025 before starting to pick up somewhat in 2026. Trade and financial
market disruptions are set to delay the recovery, given the high degree of openness of the
Swedish economy. Inflation is expected to stay just above 2% in 2025 and to fall in 2026,
reflecting import price pass-through, weak resource utilisation, and modest wage increases. The
labour market is expected to follow the weak economic conditions and improve slowly in 2026.
Public finances are projected to improve somewhat. The general government deficit, at 1.5% of
GDP in 2024, is expected to remain stable in 2025 before decreasing to just under 1% of GDP in
2026. The gross debt-to-GDP ratio is set to remain stable at just below 34%.

Uncertainty to delay recovery

At the end of 2024, the Swedish economy started Graph III.27.1: Sweden - Real GDP growth and contributions
to show signs of a cyclical upturn, supported by
7 pps. forecast
lower interest rates and fading price pressures. 6
However, real GDP stagnated in the first quarter 5
of 2025 and the recovery is expected to be 4
3
delayed by global trade disruptions. In addition to 2
the direct negative effects of external economic 1
developments, heightened uncertainty is set to 0

weigh on business and consumer confidence. This -1

-2
in turn is set to hold back private consumption -3
and investment, particularly in cyclically sensitive -4
17 18 19 20 21 22 23 24 25 26
equipment, even though housing construction is
expected to bottom out. Economic growth is set to Net exports Investment Priv. consumption

gradually pick up in 2026, primarily supported by Gov. consumption Inventories Real GDP (y-o-y%)

stronger private consumption growth as

households are expected to reduce their savings rate in view of receding uncertainty, disinflation
and improved conditions in the labour market. Overall, real GDP growth is forecast to average
1.1% in 2025 and 1.6% in 2026. The balance of risks is nevertheless tilted to the downside.

Labour market to remain weak

In response to modest economic growth, the labour market is expected to remain weak in 2025,
with the unemployment rate rising to 8.7% before falling backs somewhat in 2026 on the back of
a modest pick-up in employment following the expected recovery with a lag. This notwithstanding,
structural unemployment is set to remain relatively high, negatively affected by education and skill
gaps. Social partners agreed nominal wage rises of around 3.5% in both 2025 and 2026 which is
expected to help secure real wage gains with limited inflationary pressures and low increases in
unit labour costs over the forecast horizon.

Inflation to recede in 2026

Consumer price inflation is set to remain somewhat above 2% throughout 2025, reflecting
persistent rises in food prices partly offset by trade-induced decreases in prices of non-industrial
goods and lower energy prices. Inflation is set to fall below 2% in 2025, reflecting a number of
factors. These include the fading price impact of trade-induced supply effects, the delayed impact
of the effective appreciation of the krona, moderate increases in unit labour costs, and the
absence of demand pressures on prices.

Public finances remain in moderate deficit

The general government balance in 2024 was -1.5%, due to weak overall growth and a capital
injection into the central bank, worth over one third of a percentage point of GDP. In 2025, with

144
 Non-EA Member States, Sweden

continued substantial spending on infrastructure and defence and slowing tax revenue growth, the
balance is set to remain stable at -1.5% of GDP. As growth is expected to pick up in 2026, and
with it government revenue, the nominal general government balance is set to improve to -0.8% of
GDP.
While increasing somewhat from 2024, the general government gross debt ratio is projected to
remain stable over the forecast horizon between 33 and 34% of GDP.

Table III.27.1: Main features of country forecast - SWEDEN

2024 Annual percentage change

bn SEK Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 6447.5 100.0 1.7 5.9 1.5 -0.1 1.0 1.1 1.9
Private Consumption 2878.6 44.6 2.0 6.0 2.8 -2.1 0.3 1.3 2.1
Public Consumption 1697.8 26.3 1.1 3.4 0.7 1.4 1.2 1.3 0.4
Gross fixed capital formation 1572.6 24.4 2.7 7.3 0.3 -1.5 -1.1 1.0 2.0
Exports (goods and services) 3520.4 54.6 2.7 11.9 6.2 3.7 2.3 2.0 1.9
Imports (goods and services) 3237.3 50.2 3.2 12.8 9.7 -0.8 1.7 1.8 1.3
GNI (GDP deflator) 6730.6 104.4 1.9 6.1 1.8 0.1 1.1 0.4 1.8
Contribution to GDP growth: Domestic demand 1.8 5.4 1.5 -1.0 0.2 1.2 1.5
Inventories 0.0 0.4 1.2 -1.5 0.3 -0.2 0.0
Net exports -0.1 0.1 -1.2 2.4 0.4 0.1 0.4
Employment 1.0 1.3 3.5 1.2 -0.3 0.2 0.5
Unemployment rate (a) 7.5 8.9 7.5 7.7 8.4 8.7 8.4
Compensation of employees / head 3.0 4.9 2.1 5.4 4.7 3.7 3.5
Unit labour costs whole economy 2.2 0.2 4.2 6.7 3.4 2.8 2.0
Saving rate of households (b) 13.4 17.5 14.8 16.2 18.1 17.4 15.9
GDP deflator 1.9 2.7 5.8 6.0 2.8 1.7 1.7
Harmonised index of consumer prices 1.4 2.7 8.1 5.9 2.0 2.2 1.6
Terms of trade goods 0.3 0.1 -4.5 0.7 0.5 1.0 0.2
Trade balance (goods) (c) 4.3 4.6 3.7 5.4 5.9 6.1 6.2
Current-account balance (c) 4.7 6.3 4.2 6.7 7.0 6.8 7.0
General government balance (c) 0.2 -0.2 1.0 -0.8 -1.5 -1.5 -0.8
Fiscal stance (c) 0.5 -0.2 0.5 0.0 -0.7 0.7 0.4
Structural budget balance (d) 0.0 -0.4 0.9 0.0 -0.5 -0.4 0.0
General government gross debt (c) 41.0 36.9 33.8 31.6 33.5 33.8 33.3
(a) Eurostat definition. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

145
Candidate Countries
 28. ALBANIA

Following a strong growth momentum in previous years, Albania’s economy is expected to grow
by 3.6% in 2025 and 3.5% in 2026, driven by domestic demand. Supported by tourism, exports
of services are set to continue expanding, while exports of goods are expected to rebound
somewhat following two years of significant contraction. After a rapid decline in 2024, inflation
is expected to gradually return to the 3% target next year. The fiscal deficit is set to widen
before falling below 2% of GDP in 2026. The public debt-to-GDP ratio is forecast to decrease
only gradually, driven by nominal GDP growth.

Economic activity to remain robust

Albania’s economic growth remained strong at Graph III.28.1: Albania - Real GDP growth and contributions
4% in 2024, driven by robust domestic demand,
10 pps. forecast
good tourism performance and sustained
8
construction activity. The rise in household
6
consumption was supported by increasing real
wages amid slowing inflation, and by accelerating 4

credit growth. Public consumption growth was 2

elevated on the back of the second phase of the 0

public wage reform. Job creation in the services -2

sector supported employment growth. Exports of -4

services expanded, but goods exports fell -6

17 18 19 20 21 22 23 24 25 26
significantly due to an unfavourable external
environment and the appreciation of the lek. Net exports Investment Priv. consumption

Similarly to 2023, most economic sectors Gov. consumption Inventories Real GDP (y-o-y%)

recorded positive output growth, but agriculture

and industry contracted.
In 2025-2026 GDP growth is forecast to moderate compared to previous years but remain robust
at 3.6% and 3.5% respectively. Public consumption growth is projected to slow down as the impact
of the public wage reform fades, while private consumption, supported by growing real wages and
improvements in the labour market, is set to remain strong over the forecast horizon. Investment
growth is underpinned by favourable financing conditions and the implementation of the Reform
Agenda under the EU Reform and Growth Facility. On the external side, services exports are
expected to continue expanding, but the growth in tourist arrivals is set to soften from the double-
digit growth rates seen in previous years. After bottoming out in 2024, goods exports are projected
to recover somewhat as the merchandise sector is undergoing structural changes, and the effect
of the currency appreciation softens. The current account deficit is set to increase slightly from its
historic low registered in 2023, but remains much below its long-term average, pointing to
structural improvements brought about by the increase in tourism.
This outlook is subject to downside risks, linked to changes in the exchange rate and interest rates
and increasing shortages of skilled labour aggravated by emigration. As a small open economy,
Albania is exposed to external risks related to the economic impact of the tariffs on its main
trading partners in the EU, such as Italy. Moreover, global uncertainty and geopolitical risks may
affect FDI inflows.

Employment gains set to moderate

Employment increased in 2024 and is expected to grow further over 2025-2026, albeit at a more
moderate pace. A higher labour force participation rate is expected to be the main driver of labour
supply growth while continued emigration is likely to pose a constraint. The unemployment rate is
expected to remain stable, while wages continue to increase.

148
 Candidate Countries, Albania

Rapid fall in inflation in 2024 set to be followed by a pick-up

Inflation dropped from 3.4% in January 2024, its highest reading in the year, to 2.1% in December,
leading to an annual average inflation rate of 2.2%, down from 4.8% a year before. This decline
was primarily driven by lower food and oil prices, alongside the steady appreciation of the lek.
Headline inflation excluding food and energy also dropped in 2024. In reaction, the Bank of Albania
implemented two reductions in the policy interest rate in 2024, lowering it from 3.25% to 2.75%.
Average annual inflation is projected to increase in 2025, supported by higher imported inflation,
and to reach the central bank’s target of 3% in 2026.

Fiscal deficit is set to widen before narrowing in 2026

In 2024, the general government budget deficit Graph III.28.2: Albania - General government budget balance
narrowed to 0.7% of GDP, which was lower than and gross debt
the budget target of 2.3%. While revenues
performed well, this fiscal outcome was partly the 0
% of GDP
80
% of GDP forecast
result of public investment under-execution. The 70
budget deficit is set to widen to 2.4% of GDP in
-2 60
2025 on the back of higher expenditure, in
50
particular capital spending. Revenue growth is
expected to be supported by the implementation -4 40

of the medium-term revenue strategy over 2025- 30

2026, which focuses on enhancing tax and -6 20

customs administration. A lower expenditure-to- 10

GDP ratio (driven by both current and capital -8 0
spending) is projected to help decrease the 17 18 19 20 21 22 23 24 25 26
Gross debt (rhs) Budget balance (lhs)
budget deficit to 1.9% of GDP in 2026. The
primary balance is projected to remain in surplus,
in line with the national fiscal rule. The government debt-to-GDP ratio fell below 55% in 2024,
supported by a positive primary balance, nominal GDP growth and the appreciation of the
exchange rate. The debt ratio is projected to decline in 2025-2026 at a more moderate pace,
driven by nominal GDP growth.

Table III.28.1: Main features of country forecast - ALBANIA

2024 Annual percentage change

bn ALL Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 2530.0 100.0 : 9.0 4.8 3.9 4.0 3.6 3.5
Private Consumption 1760.3 69.6 : 4.5 6.0 2.9 3.5 3.1 3.0
Public Consumption 324.4 12.8 : 1.4 2.3 4.9 3.6 2.9 2.6
Gross fixed capital formation 609.8 24.1 : 19.6 1.6 1.0 4.3 5.3 5.0
Exports (goods and services) 913.6 36.1 : 52.1 17.0 9.5 -0.8 3.6 3.6
Imports (goods and services) 1086.9 43.0 : 32.5 11.5 0.2 6.0 5.0 3.4
GNI (GDP deflator) 2509.7 99.2 : 9.3 4.4 4.1 4.8 3.6 3.5
Contribution to GDP growth: Domestic demand -3.9 8.5 5.0 2.9 3.9 3.8 3.6
Inventories 0.4 0.7 -0.4 -2.4 3.0 0.7 0.0
Net exports 0.2 -0.3 0.2 3.4 -2.9 -0.8 -0.2
Employment : 0.1 4.0 1.5 1.4 1.3 1.0
Unemployment rate (a) : : : : 8.5 8.5 8.4
Compensation of employees / head : 11.2 5.1 13.6 11.2 7.1 7.1
Unit labour costs whole economy : 2.1 4.3 10.9 8.5 4.7 4.6
Saving rate of households (b) : : : : : : :
GDP deflator : 3.4 9.9 6.1 2.7 2.7 3.2
Consumer price index : 2.0 6.7 4.8 2.2 2.5 3.0
Terms of trade goods : 1.8 1.6 8.3 1.9 -1.0 -0.1
Trade balance (goods) (c) -23.9 -25.1 -23.5 -20.7 -22.2 -22.2 -22.0
Current-account balance (c) -10.0 -7.6 -5.9 -1.3 -2.4 -2.4 -2.4
General government balance (c) 8.5 -4.6 -3.6 -1.3 -0.7 -2.4 -1.9
Structural budget balance (d) : : : : : : :
General government gross debt (c) 63.4 74.1 64.1 57.5 53.9 53.5 53.0
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

149
 29. BOSNIA AND HERZEGOVINA

Economic activity slightly accelerated in 2024 on the back of strong domestic demand,
benefitting from rising real disposable income as a result of high nominal wage growth, declining
inflation and solid remittances from abroad. GDP growth is set to remain subdued due to
persisting structural and governance weaknesses and the latest trade-related uncertainties.
Decelerating import prices are projected to bolster domestic demand. The government deficit is
expected to remain contained, while the country’s public debt-to-GDP ratio is forecast to remain
stable. Risks are largely on the downside.

Economic activity is set to remain resilient over the forecast period

Economic growth picked up to 2.5% in 2024 Graph III.29.1: Bosnia and Herzegovina - Real GDP growth
primarily relying on domestic demand. Private and contributions
consumption benefited from strong real wage 10 pps. forecast
growth, reflecting declining inflation and high 8
nominal wage increases. Gross investment growth 6
remained solid, although a large share of this
4
increase appears to come from inventories and
2
statistical discrepancies. Commodity exports
0
contracted markedly, reflecting weak demand
-2
from key export markets, while import growth
accelerated, probably in response to increased -4
private consumption and gross investment. In -6 17 18 19 20 21 22 23 24 25 26
autumn 2024, heavy rainfalls triggered
Net exports Investment Priv. consumption
widespread floods and landslides, causing deaths
Gov. consumption Inventories Real GDP (y-o-y%)
and widespread destruction. However, so far, the
economic impact has remained limited. Net
financial inflows in the form of transfers remained stable in 2024, at some 10% of GDP. The
current account deficit widened due to weaker exports, while net inflows of FDI remained low.
Over the forecast period, domestic demand is expected to remain resilient. Private consumption is
likely to remain stable, increasing by about 2% y-o-y, benefiting from recent wage increases,
reflecting persistent labour shortages due to labour emigration and upcoming general elections.
However, growth of public and private investment is likely to remain moderate in view of political
stalemates. External demand is projected to take a hit as a result of increased international trade
hurdles, which however is likely to affect the country mainly indirectly, through weaker demand
from the country’s main trading partners. Overall, GDP growth is expected to decelerate in 2025
(to about 2%), while in 2026, the projected recovery of external demand is likely to result in
slightly stronger GDP growth, although still below the country’s potential.

The labour market situation is set to remain tight, due to a shrinking labour supply
Registered employment growth slowed down from 1.4% in 2023 to 0.5% in 2024. Trade and
tourism continued to be sectors with the largest employment gains, while employment declined in
other sectors such as mining and agriculture. There are indications of a continued outflow of
qualified labour, which is expected to result in labour shortages in some sectors, such as
construction and health. This is set to contribute to further wage pressures above productivity
growth. The outflow of labour also helped to reduce the LFS unemployment rate, which dropped
from 13.2% in 2023 to 12.6% in 2024 and is likely to continue dropping further during the
forecast period.

Inflation is expected to remain contained

Inflation continued to fall during 2024, reaching 1.7% on average, compared to 6.1% in 2023. This
inflation moderation has been broad-based, largely driven by decelerating import price increases.

150
 Candidate Countries, Bosnia and Herzegovina

Nominal wage growth was nearly 10% in 2024 and is projected to remain high, also reflecting
labour shortages in certain areas, such as in construction and health services. This is expected to
maintain some upward pressure on headline inflation, which is expected to rise to about 3% and
3¼% respectively in 2025 and 2026, as domestic price pressures, resulting from strong recent
wage increases and expected electricity price increases, are likely to dominate the inflation
reducing effect of lower import prices.

Public finances to face additional spending pressures

The general government expects a deficit of 1.3% Graph III.29.2: Bosnia and Herzegovina - General government
of GDP in 2024, despite stronger than expected budget and gross debt
revenue growth, which however was partly used
to finance additional current spending. However, 4
% of GDP
40
% of GDP forecast
due to a lack of compliance with EU accounting
standards, the reliability of public sector data is 2
30
low. In late 2024 and early 2025, the authorities
adopted significant permanent spending 0

increases (e.g. on public sector wages and 20

-2
pensions, as well as minimum wages), which are
projected to increase the fiscal deficit in 2025 10
-4
and beyond. Furthermore, the cost for repairing
flood damages is likely to create additional -6 0
spending pressures, impeding the reduction in the 17 18 19 20 21 22 23 24 25 26
Gross debt (rhs) Budget balance (lhs)
public-debt ratio.

Risks are largely on the downside

The country’s direct exposure to the US export market is rather limited. Besides, indirect trade
effects, on the domestic side, a resurge of political tensions could lead to further delays in overdue
structural reforms.

Table III.29.1: Main features of country forecast - BOSNIA AND HERZEGOVINA

2024 Annual percentage change

bn BAM Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 51.2 100.0 2.3 7.4 4.2 2.0 2.5 2.0 2.3
Private Consumption 35.4 69.0 1.4 4.2 1.9 1.1 2.1 1.8 2.0
Public Consumption 10.0 19.6 1.4 2.9 1.3 2.1 2.2 2.1 2.5
Gross fixed capital formation 12.7 24.7 3.6 5.1 0.3 12.1 2.2 2.0 4.0
Exports (goods and services) 21.9 42.8 5.9 25.4 11.8 -1.2 -3.1 2.4 2.8
Imports (goods and services) 29.3 57.2 2.5 20.6 6.2 -1.3 2.8 2.2 3.1
GNI (GDP deflator) 51.4 100.4 : 6.6 4.2 2.8 3.5 2.0 2.3
Contribution to GDP growth: Domestic demand 2.3 4.8 1.7 3.9 2.4 : :
Inventories 0.0 4.5 0.6 -2.1 3.3 : :
Net exports 0.4 -1.1 1.7 0.2 -2.9 -0.2 -0.6
Employment : -1.9 1.0 1.0 1.1 0.5 0.7
Unemployment rate (a) : 17.4 15.4 : : 11.2 10.9
Compensation of employees / head : 4.0 13.0 12.2 8.5 8.2 5.6
Unit labour costs whole economy : -5.0 9.5 11.1 7.1 6.7 3.9
Saving rate of households (b) : : : : : : :
GDP deflator : 5.0 11.8 7.3 0.1 4.0 3.9
Consumer price index : 2.0 14.0 6.1 1.7 3.0 3.3
Terms of trade goods : 8.8 -4.7 -0.7 -1.5 -0.1 -0.1
Trade balance (goods) (c) -29.3 -18.3 -22.3 -20.6 -22.9 -22.4 -22.2
Current-account balance (c) -7.1 -1.5 -4.4 -2.3 -3.9 -3.5 -3.3
General government balance (c) -0.3 0.4 0.1 -1.1 -1.3 -1.5 -1.0
Structural budget balance (d) : : : : : : :
General government gross debt (c) 35.4 33.9 29.3 26.4 27.3 27.3 26.5
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

151
 30. GEORGIA

Following another year of very strong growth, Georgia’s economic activity is projected to
decelerate but to remain robust at 5-6% in 2025 and 2026, partly reflecting positive spillovers
from Russia’s war of aggression on Ukraine. Growth is expected to continue to be driven by
domestic demand, especially by private and government consumption. Inflation is set to pick up
temporarily due to the pass-through from wage increases and demand pressures, before
returning close to the central bank’s target. The current account deficit is projected to widen,
driven by the increasing trade deficit. The general government deficit is expected to remain
contained, and the public debt-to-GDP ratio is set to continue declining.

Robust economic growth, driven by consumption

Economic growth was very strong in 2024, at Graph III.30.1: Georgia - Real GDP growth and contributions
9.4%. Private and government consumption were
15 pps. forecast
the most important growth factors, stimulated by
strong wage increases, employment growth and 10
fast-growing consumer loans. Investment picked 5
up strongly in the same period, supported by
higher business lending, good financial results of 0

enterprises and strong public investment. The -5

contributions of net exports of goods and services
-10
and of inventories to growth were negative. On
the supply side, the value added increased most -15
17 18 19 20 21 22 23 24 25 26
in ICT, construction, tourism, transport and other
services. Georgia continues to benefit from the Net exports Investment Priv. consumption

reallocation of certain services and trade routes Gov. consumption Inventories Real GDP (y-o-y%)

away from Russia following its full-scale war of

aggression against Ukraine, reflecting in part a sizeable inward migration from Russia.
Growth is projected to decelerate in 2025 and 2026 but to remain robust at 5-6%. Private
consumption is set to remain the main growth driving factor, supported by strong consumer
lending and continued, albeit slower, increases in real wages. Investment is also projected to grow,
driven by dynamic business loans and strong public investment, although business confidence has
deteriorated markedly in the first quarter of 2025 reflecting the political turmoil in the country. The
contribution of net exports to growth is set to remain negative, although lower than in 2024, as the
demand for goods imports triggered by strong consumption and investment is expected to be
stronger than the positive contribution from growing tourism and other services exports. The
forecast is subject to an unusually high degree of uncertainty regarding domestic political
developments and how geopolitical tension plays out in the region, which may adversely affect
business and consumer sentiments.

Labour market situation improvement, wage increases

Supported by the economic expansion, the unemployment rate decreased sizeably from 16.4% in
2023 to 13.9% in 2024 and is projected to continue falling in 2025 and 2026, although at a
slower pace. The employment rate increased by 2.5 pps in 2024, although it remained at a
relatively low level of 47.1%. Preliminary data indicate a very strong increase in wages, by 15% in
real terms in 2024, which reflects several factors: the wage contagion from high-skilled migrants
from Russia, notably to the IT sector, the willingness of Georgian companies to compensate for
rising living costs, especially of housing rents in the main cities, labour shortages in some
production sectors and the rapid decrease in inflation in 2024. Wage growth is expected to ease in
the next years, but to remain higher than productivity growth.

152
 Candidate Countries, Georgia

Inflation to pick up temporarily before stabilising around the central bank’s target
The average consumer price inflation slowed down to 1.1% in 2024 thanks to low imported
inflation and prudent monetary policy of the central bank. Inflation has, however, increased in the
first months of 2025 to 3.4% in April and is expected to reach 4% on average in 2025. The
acceleration of consumer prices can be attributed to the pass-through from wage increases and
from the limited depreciation of the lari, as well as to base effects. As these factors are expected
to gradually fade, inflation is set to return towards the central bank’s 3% target in 2026.

Narrower current account deficit due to dynamic exports of services

The current account deficit narrowed down to 4.3% of GDP in 2024 from a 5.6% of GDP in 2023.
Goods exports increased by 6% in USD terms, thanks to a rebound in demand for metallurgical
products and re-exported cars. Imports increased at a similar rate, due to higher domestic demand
for investment and consumer goods. A stronger surplus in services and a lower net outflow of
investment income have contributed to diminishing of the current account deficit, while lower
inflow of remittances had an opposite effect. In 2025 and 2026 the current account deficit is
expected to slightly widen. The surplus in services is projected to rise, mainly thanks to the rising
inflow of tourists, which does not seem to be affected by the political developments in Georgia,
while the trade deficit is set to increase as imports are projected to grow faster than exports.

Limited fiscal deficit, with public debt on a downward path

The general government outturn in 2024 was supported by a strong revenue performance, which
was 18% higher than in the same period of 2023. It was boosted by the economic expansion,
wage increases stimulating personal income tax revenues, as well as by discretionary measures
such as increases in gambling fees and taxes from the banking sector. Current expenditure
increased by 20% in the same period, mainly due rising public sector salaries and interest
expenditure, while the already high capital expenditure increased by 10%. The general government
deficit stood at 2.1% of GDP in 2024, below the 2.5% of GDP deficit stipulated in the budget law.
The deficit-to-GDP ratio in 2025 and 2026 is expected to remain at around 2% of GDP, well below
3% of GDP ceiling from the country’s fiscal rule. The general government debt amounted to 36.1%
of GDP in December 2024 and is expected to further decline over the forecast horizon.

Table III.30.1: Main features of country forecast - GEORGIA

2024 Annual percentage change

bn GEL Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 91.9 100.0 : 10.6 11.0 7.8 9.4 6.0 5.2
Private Consumption 65.6 71.3 : 12.3 -2.8 4.7 11.0 6.0 5.0
Public Consumption 12.4 13.4 : 7.1 -0.8 7.5 24.7 7.5 5.5
Gross fixed capital formation 20.3 22.0 : -4.8 9.9 29.4 15.0 8.0 7.0
Exports (goods and services) 44.4 48.4 : 23.5 37.4 9.5 5.9 6.4 5.4
Imports (goods and services) 51.4 56.0 : 8.8 16.9 10.0 8.5 7.4 5.8
GNI (GDP deflator) 85.9 93.5 : 8.9 10.2 6.8 10.9 6.7 5.8
Contribution to GDP growth: Domestic demand 4.3 8.8 -0.5 8.8 12.7 7.1 5.9
Inventories 0.1 -2.9 4.7 -1.1 -2.9 0.0 0.0
Net exports -1.2 3.8 6.0 -1.2 -2.0 -1.0 -0.6
Employment -2.1 -2.0 5.4 4.0 5.1 2.0 2.0
Unemployment rate (a) 20.9 20.6 17.3 16.4 13.9 13.0 12.1
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator : 10.2 8.1 2.9 3.8 4.3 3.2
Consumer price index 5.0 9.6 11.9 2.5 1.1 4.0 3.2
Terms of trade goods : -2.5 0.4 -8.3 5.9 1.0 0.0
Trade balance (goods) (c) -22.8 -20.0 -20.2 -19.8 -19.1 -19.7 -20.4
Current-account balance (c) -10.0 -10.3 -4.4 -5.6 -4.4 -4.7 -5.2
General government balance (c) -2.0 -5.9 -2.2 -1.9 -2.1 -2.1 -2.0
Structural budget balance (d) : : : : : : :
General government gross debt (c) 36.2 49.1 39.2 38.9 36.1 35.4 34.6
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

153
 31. MOLDOVA

The economic recovery came to a halt in 2024, due to another weak harvest and related drop in
demand for transport services. While these factors are set to continue weighing on real GDP
growth in the first half of 2025, along with the renewed energy price crisis, growth is projected to
gradually regain traction. Private consumption growth is set to remain robust, driven by rising real
wages. While tighter monetary policy and increased energy prices are expected to slow
investment growth, public investment is forecast to gain momentum in 2026 supported by EU
financial assistance from the new Reform and Growth Facility. The general government deficit is
projected to widen in 2025 and 2026 on account of the expected growth-enhancing expenditure
supported through the Facility’s financial resources, while the debt-to-GDP ratio is expected to
rise over the forecast horizon.

Slow economic recovery following contraction in the second half of 2024…

The economic recovery, which started in 2023, came to a halt in the second half of 2024, primarily
because of a sharp drop in agricultural output following a summer drought. The contraction
remained contained thanks to a rebound in private consumption underpinned by rising real wages
as well as strong investment growth driven by looser monetary policy and a support programme
for real estate investments.
Real GDP growth is set to slowly recover over the Graph III.31.1: Moldova - Real GDP growth and contributions
forecast period as the drag on growth stemming
25 pps. forecast
from the weak harvest in 2024 fades and
20
domestic demand is expected to remain strong.
15
The recovery in employment and higher real
incomes, also due to the government 10

compensatory measures shielding consumers 5

from some of the impact of the energy price 0

increase, are projected to continue boosting -5

private consumption in 2025 and 2026. -10

Investment growth is expected to slow in 2025 as -15

17 18 19 20 21 22 23 24 25 26
higher energy prices weigh on business
sentiment, before strengthening in 2026, on the Net exports Investment Priv. consumption

back of strong public investment supported by the Gov. consumption Inventories Real GDP (y-o-y%)

Reform and Growth Facility.

Net exports are expected to continue weighing on growth in 2025 and 2026, although their
negative impact is projected to ease. Exports have declined as a result of weaker growth amongst
key trading partners, a summer drought affecting agricultural output and falling re-exports to
Ukraine in 2024 that are set to reach pre-2022 levels by 2026. Growing services exports, mainly
from the expanding ICT sector and tourism, and the expected recovery of agricultural exports are
set to support net exports in 2025 and 2026. Imports are projected to continue growing due to
sustained strong domestic demand and a sharp increase of electricity imports as a consequence of
the cut-off of Russian gas supply to the Transnistrian region. Short-term downside risks remain
high, particularly climate-related risks and geopolitical uncertainties.

…as real wages are set to rise further, alongside a recovery of agriculture
Real wages continued to grow in the second half of 2024 largely on account of lower inflation
though at a slower pace. Until 2026, they are expected to be boosted by higher public sector
salaries and minimum wages as well as continued labour shortages. Pension indexation is also set
to support household incomes, while energy compensation payments help offsetting higher energy
costs. Both employment and labour force participation fell in the second half of 2024, primarily
due to the negative impact of the summer drought on agriculture. However, policies supporting
women’s participation across sectors cushioned the effect on female employment. Overall

154
 Candidate Countries, Moldova

employment growth is expected to rebound in 2025 and to remain solid in 2026 as agriculture
recovers, and the economic growth strengthens.

Inflation to remain above central bank target before declining at the end of 2025
Following a disinflationary period, inflation averaged 3.9% in the first half of 2024 but rebounded
again in the second half of the year on account of higher food prices, partly attributed to the
drought in summer 2024 and an increase in energy prices. Continuously rising energy prices
pushed up inflation to 8.75% in March 2025. In response to rising inflation, the NBM shifted to
monetary tightening beginning of 2025 increasing the base rate up to 6.5% in February 2025.
Inflation is projected to remain above the central bank’s target range of 5% ±1.5% in 2025 but to
decline again towards the end of 2025. However, risks related to price effects from energy import
and further food price volatility remain elevated.

Current account deficit to remain large and fiscal deficit to widen

The current account deficit is expected to remain elevated. The trade deficit is set to remain
negative on account of the country’s weak export base, its reliance on energy imports and a sharp
increase in electricity imports following the cut-off of electricity supply from the Transnistrian
region. Remittances are projected to remain high though on a steady downward trend despite
continued out-migration, primarily because of increasing family reunification abroad. An increase
of flows of foreign financing due to recent EU energy support and the Reform and Growth Facility
is set to support external financing needs.
The fiscal deficit-to-GDP ratio fell below 4% in 2024, lower than initially projected, primarily due to
stronger-than-expected revenues and an under-execution of public investments. In 2025, the
deficit is projected to widen to 5% driven by increases in public salaries, and higher current and
capital expenditure supported by additional funding from the Reform and Growth Facility. Revenue
growth, supported by the gradual economic recovery, is projected to continue, but at a slower pace
than expenditure growth as a share of GDP. Public debt is expected to rise to 40.9% of GDP in
2026 mainly due to the higher fiscal deficits linked to the additional financing under the Reform
and Growth Facility.

Table III.31.1: Main features of country forecast - MOLDOVA

2024 Annual percentage change

bn MDL Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 323.8 100.0 : 13.9 -4.6 1.2 0.1 0.9 2.8
Private Consumption 281.2 86.8 : 17.2 -5.0 -0.8 2.7 2.4 3.3
Public Consumption 57.9 17.9 : 3.0 10.7 -4.0 -3.6 1.0 2.0
Gross fixed capital formation 64.7 20.0 : 1.9 -10.5 0.0 8.0 4.0 5.0
Exports (goods and services) 101.7 31.4 : 17.5 29.7 4.8 -5.2 3.9 5.4
Imports (goods and services) 185.4 57.3 : 21.2 18.2 -5.1 5.1 6.0 5.3
GNI (GDP deflator) 326.6 100.9 : 12.2 -6.4 2.4 -0.6 1.0 3.0
Contribution to GDP growth: Domestic demand 2.1 13.5 -5.2 -1.4 3.2 3.1 4.3
Inventories -0.7 5.4 2.1 -3.0 1.7 0.0 0.0
Net exports -0.3 -6.0 -1.4 5.6 -4.8 -2.2 -1.4
Employment : 1.1 2.2 2.8 -3.7 2.5 1.4
Unemployment rate (a) : : : : 4.0 3.7 3.6
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator : 6.4 18.9 9.3 6.6 7.8 5.9
Consumer price index 7.0 5.1 28.7 13.4 4.7 7.3 4.7
Terms of trade goods : 2.6 -3.2 -9.1 1.7 0.0 0.0
Trade balance (goods) (c) -28.1 -30.6 -35.9 -29.2 -30.9 -32.0 -32.0
Current-account balance (c) -4.0 -9.7 -16.6 -11.4 -16.0 -15.6 -15.4
General government balance (c) -2.0 -1.9 -3.2 -5.8 -3.7 -5.0 -5.1
Structural budget balance (d) : : : : : : :
General government gross debt (c) 34.4 33.6 35.0 34.9 38.2 39.8 40.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

155
 32. MONTENEGRO

Montenegro’s economic growth moderated in 2024 due to weak exports, while private
consumption and recovering investment supported economic activity. Recently adopted
measures to raise the minimum wage and cut pension contributions are set to support GDP
growth in 2025, but also to contribute to higher inflation. The general government deficit in
2024 was broadly in line with the revised target. The implementation of policy measures is set
to weaken budget revenue and raise spending, leading to widening budget deficits in 2025-
2026 and increasing public debt.

Domestic demand remains key driver of growth

Real GDP growth for 2024 was 3%. Economic growth was driven by rebounding investment (9.3%
y-o-y) and strong private consumption (8.7%), which was supported by increases in minimum
pensions, wages and employment. Due to the poor performance of electricity exports and a weak
tourism season, exports of goods and services contracted by 3.2%, while imports grew by 5.5%,
resulting in a negative contribution of net exports to GDP growth. Government consumption
expanded moderately.
Economic growth is likely to remain moderate in Graph III.32.1: Montenegro - Real GDP growth and
2025-2026, at 3% and 3.2% respectively. The contributions
full-year implementation of “Europe Now 2.0” 20 pps. forecast
programme, which among others cut pension 15
contributions and increased the minimum wage, 10
is set to drive private consumption and
5
investment in 2025. The positive impact on
0
private consumption is projected to fade in 2026,
-5
while the growth of investment is set to continue
due to the implementation of large road and -10
railway projects. Exports are projected to continue -15
contracting in 2025 due to the planned temporary -20 17 18 19 20 21 22 23 24 25 26
closure of the Plevja thermal power plant, while
Net exports Investment Priv. consumption
the growth of service exports (tourism) is likely to
Gov. consumption Inventories Real GDP (y-o-y%)
remain muted. A modest recovery of exports is
projected in 2026 due to a partial recovery of
service exports. Import growth is forecast to increase in 2025-2026 in line with domestic demand
and additional electricity imports due to the closure of the power plant.
The current account deficit widened in 2024 due to a poor performance of merchandise exports
and a weak tourism season, while the surpluses of primary and secondary income balances
declined, in line with the subdued growth momentum in the EU and lower remittances. The current
account deficit is set to widen in 2025-2026 in line with the weak export performance and the
growth in imports on the back of strong domestic demand.

Further decreasing unemployment rates

Employment gains across all sectors continued into 2024 and the unemployment rate declined to
a new record low of 11.5% in 2024. Employment growth is expected to accelerate somewhat in
2025 due to reduced pension contributions and the implementation of new investment projects.
This effect is likely to weaken in 2026 as increasing wages weigh on the creation of new jobs in
the services sector.

Domestic policy measures generate upward price pressures

Inflation declined in 2024 with annual inflation falling to 1% y-o-y in September before recovering
to 2.8% in February 2025. The deceleration of headline inflation in 2024 took place on the back of

156
 Candidate Countries, Montenegro

lower prices for food and energy, while inflation excluding energy and food has remained
stubbornly high, hovering around 5%. In 2025 consumer prices are projected to hover around the
same level, supported by domestic price pressures stemming from higher wages and social
transfers while import prices are likely to have a negative impact of inflation. For 2026 inflation is
expected to moderate, under the assumption of no policy change.
Risks to the outlook are skewed to the downside. Montenegro’s exposure to the US is limited, but a
key downside risk is related to the uncertain global environment and the ensuing slowdown in
exports. Montenegro’s narrow export base and small economy makes it highly vulnerable to
fluctuations in international demand.

The budget balance deteriorates

The 2024 budget deficit, at 3.1% of GDP, Graph III.32.2: Montenegro - General government budget
performed close to the revised target but balance and gross debt
deteriorated significantly compared to 2023 due
to higher social transfers and capital spending 2
% of GDP
120
% of GDP forecast
and a decrease in one-off revenue. Going 110
0
forward, the general government deficit is 100
90
projected to widen to 3.7% of GDP due to lower -2
80
revenue on the back of halving pension -4 70

contributions, higher minimum wages and the -6 60

50
regular indexation of pensions. Absent strong 40
compensatory measures, public debt is projected -8 30

to increase to 64.5% of GDP in 2025, due to new -10 20

10
debt issuance which is needed to accumulate -12 0
reserves and prepare for the forthcoming large 17 18 19 20 21 22 23 24 25 26
Gross debt (rhs) Budget balance (lhs)
Eurobond repayment in 2025-2026. Overall, the
balance of risks to the fiscal outlook are tilted to
the downside due to structural budget changes, which weakened the revenue base and raised
mandatory spending.

Table III.32.1:

Table 2.1.1:
Main features of country forecast - MONTENEGRO
2024 Annual percentage change
mio EUR Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 7459.2 100.0 2.0 13.0 6.4 6.3 3.0 3.0 3.2
Private Consumption 5689.8 76.3 : 4.0 9.7 6.5 8.7 5.3 3.3
Public Consumption 1332.4 17.9 : 0.5 1.5 3.1 1.7 2.7 2.5
Gross fixed capital formation 1509.6 20.2 : -12.3 0.1 6.9 9.3 7.2 6.8
Exports (goods and services) 3347.2 44.9 : 81.9 22.7 9.0 -3.2 -0.1 3.3
Imports (goods and services) 5038.7 67.5 : 13.7 21.3 5.9 5.5 4.4 4.0
GNI (GDP deflator) 7480.4 100.3 : 13.6 6.3 5.3 2.3 3.0 3.2
Contribution to GDP growth: Domestic demand 3.8 0.0 7.4 6.8 8.5 6.0 4.4
Inventories -0.3 0.2 2.6 -0.7 -0.1 0.0 0.0
Net exports -2.0 12.9 -3.6 0.2 -5.4 -3.0 -1.2
Employment : -2.4 17.3 10.5 2.9 3.2 2.2
Unemployment rate (a) 18.1 16.8 15.0 13.4 11.5 11.0 10.8
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator : : : : : : :
Consumer price index 2.4 2.4 13.0 8.6 3.3 3.0 2.5
Terms of trade goods : : : : : : :
Trade balance (goods) (c) -43.6 -38.7 -45.1 -42.9 -43.9 -44.2 -43.8
Current-account balance (c) -15.9 -9.2 -12.9 -11.2 -17.0 -17.9 -17.5
General government balance (c) -3.5 -1.9 -4.2 0.4 -3.1 -3.7 -3.4
Structural budget balance (d) : : : : : : :
General government gross debt (c) 53.2 82.5 69.2 59.3 61.1 64.5 65.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

157
 33. NORTH MACEDONIA

GDP growth accelerated in 2024, driven by investment and public consumption. Headline
inflation continued to fall, yet it resurged towards the end of the year mainly due to base effects.
Growth is projected to gradually accelerate further, supported by a major public infrastructure
project and by household consumption, which benefits from strong wage growth and abating
inflation. The fiscal deficit turned out lower in 2024 than the government’s revised target, partly
as capital expenditure was again under-implemented. Though gradually decreasing over the
forecast period, the fiscal deficit is likely to stay above 4% of GDP in 2025, as concrete revenue-
enhancing measures are lacking, while current expenditure is bound to rise significantly.

Domestic demand to remain the sole growth driver

Real GDP increased by 2.8% in 2024. Growth was driven by investment and by public consumption,
with the latter partly reflecting a strong rise in public sector wages. Though supported by
increasing real incomes, household consumption growth remained subdued. Gross capital
formation increased by 8.9% in 2024, after declining in the preceding year. The contribution of the
external balance to growth turned negative due to slowing exports, largely reflecting the weakness
in the German economy, the biggest trading partner of North Macedonia. The current account
moved back into deficit in 2024, as the merchandise trade balance worsened and remittances fell.
Looking ahead, domestic demand is likely to Graph III.33.1: North Macedonia - Real GDP growth and
remain the sole driver of growth. The contributions
implementation of a major public roads project, 10 pps. forecast
covering parts of Trans-European Corridors 8 and 8
10d, is projected to make a strong contribution to 6

domestic demand in 2025 and 2026, given its 4

2
high domestic input share. Further rising wages
0
and pensions, declining inflation, and easing -2
credit conditions are projected to provide a boost -4
to household spending. Yet, net exports are -6
expected to detract from growth in both years, -8
given a muted economic recovery in major export -10 17 18 19 20 21 22 23 24 25 26
markets, in particular in the automotive sector,
Net exports Investment Priv. consumption
and a rise in imported inputs to feed investment
Gov. consumption Inventories Real GDP (y-o-y%)
and exports. The negative impact of the external
balance on growth would, however, diminish each
year based on expectations of gradually strengthening external demand and increasing metal
production capacity, a key export product.

Inflation to remain above 2% over the forecast horizon

Well-calibrated monetary policy and abating foreign price pressures supported the decrease of
inflation in 2024, to 3.5% on average. Inflation picked up again as of September, yet largely
reflecting base effects from the withdrawal of temporary controls on basic food prices. Inflation
excluding energy and food remained sticky with second-round effects of high energy and food
prices on other sectors receding slowly. The central bank gradually lowered the key policy rate
from 6.30% in September 2024 to 5.35% in February 2025. Inflation is projected to remain above
2% in 2025 and 2026, with potential domestic price pressures from wage and credit growth.

Structural labour market problems continue to impede faster employment growth

While employment growth picked up in the second half of 2024, after an annual drop in the first
six months, and the number of unemployed went down (age group 15-64 years), the labour force
continued to decline, albeit at a slower pace than in the preceding year. The activity rate increased
slightly overall, mainly on account of higher female participation. Average gross nominal wages

158
 Candidate Countries, North Macedonia

rose by 12.9% y-o-y on average in 2024, which is slightly less than in 2023, but real wages still
grew faster than sluggish productivity. Real wages are likely to increase also in 2025, due mainly
to the continuing implementation of the 2023 collective wage agreement for the public sector and
a further increase in the minimal wage in March 2025, amidst further declining inflation.

Budget balance to improve, while risks are mounting

At 4.4% of GDP, the general government fiscal Graph III.33.2: North Macedonia - General government
deficit remained below its revised target (4.7%) in budget balance and gross debt
2024, helped by under-implementation of capital
expenditure. The deficit is set to narrow gradually 0
% of GDP
60
% of GDP forecast
this year and next, but fiscal consolidation will
remain sluggish. No revenue-enhancing measures -2
50

are foreseen and plans to raise additional 40

revenue from formalising the informal economy -4

and from improving the tax administration remain 30

-6
vague. Yet, mandatory spending is increasing, in 20
particular on public sector wages and pensions.
-8
Capital expenditure is projected to rise gradually 10

from 3% of GDP in 2024 to 5.7% in 2026. -10 0

Financing needs are elevated, with another 17 18 19 20 21 22 23 24 25 26
Gross debt (rhs) Budget balance (lhs)
Eurobond repayment looming in 2026, while debt
levels, sovereign borrowing cost and interest
expenditure have been rising.

Risks are mainly on the downside

Risks to the growth outlook stem from weaker domestic demand than anticipated. Household
consumption might be dampened by sustained inflation and a more muted employment outlook
due to high wage growth. Given the lack of substantial progress in improving public investment
management, the Road Corridor 8/10d project could face implementation risks. On the other hand,
structural reforms, spurred by the EU’s Growth Plan, could boost productivity and growth.

Table III.33.1: Main features of country forecast - NORTH MACEDONIA

2024 Annual percentage change

bn MKD Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 948.9 100.0 2.7 4.5 2.8 2.1 2.8 3.0 3.1
Private Consumption 644.4 67.9 2.3 8.6 5.5 1.2 1.2 2.1 2.2
Public Consumption 159.3 16.8 2.1 0.9 -4.3 -1.8 9.1 6.6 5.1
Gross fixed capital formation 226.2 23.8 4.4 3.8 3.7 5.7 4.4 6.4 5.8
Exports (goods and services) 594.8 62.7 7.4 14.3 10.6 -0.6 -3.8 2.8 3.9
Imports (goods and services) 719.3 75.8 6.3 14.8 13.6 -5.8 -0.6 3.7 4.2
GNI (GDP deflator) 879.0 92.6 : 4.2 2.5 1.3 0.3 3.0 3.4
Contribution to GDP growth: Domestic demand 3.1 6.6 3.9 1.9 3.3 4.0 3.8
Inventories 0.3 0.1 3.0 -4.8 1.5 0.0 0.0
Net exports -0.8 -2.2 -4.1 5.0 -2.1 -1.0 -0.7
Employment : 2.5 -6.2 -0.1 4.4 1.3 0.6
Unemployment rate (a) : : : : 13.5 12.5 12.1
Compensation of employees / head : 4.3 18.8 17.9 8.3 6.8 5.4
Unit labour costs whole economy : 2.2 8.4 15.5 10.0 5.0 2.9
Saving rate of households (b) : : : : : : :
GDP deflator : 4.3 8.9 7.8 2.9 6.6 6.7
Consumer price index : 3.2 14.2 9.4 3.5 2.7 2.3
Terms of trade goods : -0.8 -0.7 : : : :
Trade balance (goods) (c) -21.4 -20.0 -26.3 -18.1 -20.0 -19.9 -19.7
Current-account balance (c) -3.1 -2.8 -6.1 0.4 -2.3 -2.2 -1.9
General government balance (c) -2.5 -5.3 -4.4 -4.6 -4.4 -4.3 -3.8
Structural budget balance (d) : : : : : : :
General government gross debt (c) 33.8 51.4 49.6 49.7 53.8 54.2 53.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

159
 34. SERBIA

The Serbian economy is projected to continue growing at a robust pace, but headwinds are
emerging on both the domestic and the international front. Growth is forecast to remain largely
driven by domestic demand, on the back of buoyant investment and private consumption amid a
strong labour market. In line with the surge in domestic demand, the current account deficit
widened sharply in 2024 and is expected to remain elevated. The fiscal stance is set to loosen,
with a relaxed deficit target of 3% of GDP, but public debt is still projected to decrease
marginally.

Economic activity facing growing challenges

GDP growth remained robust in 2024, at 3.9%. It Graph III.34.1: Serbia - Real GDP growth and contributions
decelerated somewhat in the second half of the
10 pps. forecast
year compared to 2024-H1 (4.5% y-o-y), to 3.3%
y-o-y in both Q3 and Q4, and even more sharply, 8

to only 2.0% y-o-y in 2025-Q1 according to flash 6

estimates. The expansion in 2024 was driven by 4

strong investment and private consumption, the 2
latter on the back of rising real disposable
0
income. In line with the strong increase in
domestic demand, import growth of 8.3% y-o-y -2

much exceeded the growth in exports (3.2% y-o- -4

17 18 19 20 21 22 23 24 25 26
y), resulting in a negative contribution of net
exports to GDP growth. Both the trade balance Net exports Investment Priv. consumption

and the primary income deficit deteriorated Gov. consumption Inventories Real GDP (y-o-y%)

markedly, the latter due to higher outflows of

dividend and interest payments, resulting in a sizeable current account deficit of 6.3% of GDP in
2024. With net foreign direct investment (FDI) at 5.6% of GDP, the current account deficit was no
longer fully covered by such inflows. The current account deficit is set to remain high in the
medium-term, with net FDI inflows now potentially falling short of full coverage.
Growth is projected to slow down in 2025 to 3.2% and strengthen again in 2026 to 3.8%, driven
by domestic demand on the back of ambitious public investment plans, high FDI inflows and rising
private consumption. Despite challenging conditions, the services sector continues to show
resilience, boosting overall growth notably thanks to strong ICT and other business services.
Overall, import growth is projected to continue to outpace exports, although exports have proven
resilient amid a weak external environment in 2024, helped by strong FDI inflows into
manufacturing and new production capacities in previous years.

Real wage growth to continue at a slower pace

The labour market continued to improve in 2024, with employment growth mounting to 2.0% and
unemployment falling to 8.6%, down from 9.4% in 2023. Nominal wage growth stood at 14.4%,
notably above inflation, translating into increases in real wages outpacing productivity growth in
recent years. Nominal and real wage growth is projected to moderate amid easing inflation but is
set to remain elevated as labour shortages in several sectors persist. For the next years,
employment is projected to continue to grow slowly but steadily by 0.5 pps. and 0.6 pps.
respectively, notably supporting private consumption together with higher real wages, while
unemployment is set to gradually decrease.

Inflation still hovering around the upper band of the target range
Consumer price inflation fell to 4.7% y-o-y in 2024, down from 12.4% in 2023, thanks to easing
food and energy price pressures. However, after reaching its lowest reading in June 2024, inflation
rebounded in the second half of the year and has since hovered around the upper end of the

160
 Candidate Countries, Serbia

National Bank of Serbia’s (NBS) target range (3%+-1.5pps), surpassing it slightly in January (4.6%)
and falling to 4.4% in March. Inflation excluding energy and food also remains elevated,
consistently exceeding 5%, thereby largely reflecting higher services inflation. In 2025, inflation is
forecast to slow down gradually to 4.0%, starting in the second half of the year, and to approach
the target mid-point thereafter, helped by lower imported inflation, the expected deceleration in
real wage growth and relatively tight monetary conditions. Since September, the NBS has refrained
from any further interest rate cuts, keeping the policy rate at 5.75%.

Relaxed deficit targets to create a slight headwind for disinflation efforts

After the deficit target for 2024 was eased to 2.7% as outlined in the supplementary budget, the
general government deficit amounted to 2.0% in 2024. As agreed with the IMF under the new
Policy Coordination Instrument (PCI) concluded in late 2024, the deficit target is set to ease to
3.0% in 2025-2027, thereby postponing the application of the deficit component of the fiscal
rules. The surge in expenditures is intended to make room for the full implementation of the
investment cycle related to the ‘Leap to the Future – Serbia 2027’ programme in connection with
the specialised EXPO 2027, while also providing for further increases in wages and pensions. Public
debt is nevertheless projected to decrease marginally, supported by relatively strong economic
growth, but the pro-cyclical loosening of the fiscal stance also comes with some downside risks,
notably for disinflation efforts. In addition, the ongoing domestic political turmoil may give rise to
higher than planned current spending.

Risks to the outlook emerge on several fronts

Demand from main trading partners in the euro area, notably Germany, remains weak and
economic sentiment has deteriorated steadily throughout the first four months of the year
following months of political unrest and ongoing student-led protests and blockades. Strong FDI
inflows, a cornerstone for the expansion of the Serbian economy, could suffer from weaker
investor sentiment amid continued political uncertainty, while the implementation of public
investments could suffer delays. Global trade tensions and the looming threat of potential US
sanctions against Serbia’s oil industry (NIS) pose further challenges to the growth outlook.

Table III.34.1: Main features of country forecast - SERBIA

2024 Annual percentage change

bn RSD Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 9638.5 100.0 2.1 7.9 2.6 3.8 3.9 3.2 3.8
Private Consumption 6047.7 62.7 1.5 7.7 3.5 0.5 4.2 4.0 4.2
Public Consumption 1712.4 17.8 0.9 4.2 1.3 -2.4 2.5 3.8 2.5
Gross fixed capital formation 2277.2 23.6 4.4 14.7 2.2 9.7 6.5 6.1 7.3
Exports (goods and services) 5078.8 52.7 7.0 20.4 17.0 2.7 3.2 3.0 4.4
Imports (goods and services) 5664.4 58.8 4.7 17.7 16.2 -1.6 8.3 4.8 5.5
GNI (GDP deflator) 9015.3 93.5 : 7.1 1.4 3.1 2.7 3.2 3.8
Contribution to GDP growth: Domestic demand 2.2 8.9 3.0 2.2 4.6 4.6 4.9
Inventories -0.1 -0.8 0.5 -1.2 2.5 -0.3 -0.1
Net exports -0.4 -0.2 -0.8 2.8 -3.2 -1.2 -0.9
Employment : -4.8 2.3 0.8 2.0 0.5 0.6
Unemployment rate (a) 17.2 11.1 9.5 9.4 8.6 8.3 8.0
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator : 5.7 10.5 13.8 5.2 3.7 3.6
Consumer price index : 4.1 12.0 12.4 4.7 4.0 3.5
Terms of trade goods : 0.2 -4.1 2.8 1.2 0.3 0.2
Trade balance (goods) (c) -12.4 -10.2 -14.2 -8.5 -9.6 -10.3 -11.0
Current-account balance (c) -6.6 -4.1 -6.6 -2.5 -6.3 -6.1 -5.9
General government balance (c) -2.8 -3.9 -3.0 -2.1 -2.0 -3.0 -3.0
Structural budget balance (d) : : : : : : :
General government gross debt (c) 71.5 54.5 52.9 48.4 47.5 47.5 47.4
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

161
 35. TÜRKIYE

Domestic political and financial market turmoil is forecast to lower economic growth and slow
down the pace of disinflation. However, disinflation is set to continue, helped by tight monetary
and fiscal policy, and lower prices of energy. Export growth is expected to be subdued but the
external position to remain stable. The budget deficit is forecast to decline but to overshoot the
authorities’ target as revenue is expected to underperform, while government indebtedness is set
to remain largely unchanged at moderate levels.

Domestic political and financial market turmoil to undercut economic growth

The economy expanded by 3.2% in 2024, broadly in line with expectations. Tight economic policies
curtailed domestic demand and rebalanced economic growth towards net exports, largely due to
falling imports. Economic activity contracted in industry, in particular in manufacturing, and slowed
down in services, but remained robust in agriculture and construction. Growth picked up in the last
quarter of 2024, with a rebound in manufacturing PMIs and stronger real sector and consumer
confidence. Although consumer confidence improved further in the beginning of 2025, the tight
policy stance has kept a lid on domestic demand and overall economic confidence remained weak.
Despite actions by the authorities to preserve Graph III.35.1: Türkiye - Real GDP growth and contributions
financial stability, the financial market volatility,
20 pps. forecast
triggered by domestic political turmoil, is
expected to have negative spillovers on the 15
economy and dampen growth in 2025. However, 10
growth is projected to rebound in 2026.
5
Household consumption is forecast to grow
moderately at around 3.5%, supported by further 0

improvements in households’ current and -5

expected financial situation. Gross fixed capital
formation increased at the end of 2024 but is -10 17 18 19 20 21 22 23 24 25 26
likely to be more subdued in the near term as
Net exports Investment Priv. consumption
earthquake reconstruction works wind down,
Gov. consumption Inventories Real GDP (y-o-y%)
while relatively high real interest rates constrain
private investment. The authorities have
announced a tighter fiscal policy to support their disinflation programme, which would be a factor
limiting public consumption growth.
Export growth is forecast to remain subdued, suppressed by the real appreciation of the lira and
lower external demand, while gains due to trade diversion, triggered by the increased US tariffs,
are expected to be limited. Import growth is forecast to slowly close the gap with exports and the
contribution of net exports to growth is set to close to zero in 2025-2026. Trade dynamics, coupled
with lower international energy prices are forecast to keep the current account deficit low.

Labour market moderating

The labour market remained surprisingly strong despite the moderation of economic activity in
2024. However, job growth is expected to weaken in 2025 and unemployment to increase, before
stabilising at a higher level. The high levels of labour underutilisation would, therefore, remain an
important characteristic of the labour market, limiting cost pressures.

Disinflation to continue but its pace remains uncertain

Tight monetary policy was instrumental in bringing down inflation and inflationary expectations.
Annual inflation declined to 38% in March, nearly halved from its peak in May 2024, and services
inflation, although persistently elevated, showed some signs of moderation. Inflation is forecast to
decline further, helped by tight monetary and fiscal policy, and lower prices of energy. However, a

162
 Candidate Countries, Türkiye

cold spell in the spring damaged some crops, posing a risk for food inflation in 2025. Although on
a downward trend, inflation is forecast to remain elevated, in the double-digits in the next two
years.

Risks remain persistently high

The Turkish economy has been battling very high Graph III.35.2: Türkiye - General government budget balance
geopolitical and domestic risks for several years. and gross debt
The risk environment has worsened in early 2025
but Türkiye is better positioned to face it than in 0
% of GDP
50
% of GDP forecast
previous years due to a sound policy mix, lower
imbalances, and the build-up of buffers. 40

Nevertheless, managing the ongoing economic -2

rebalancing is set to remain challenging. 30

20
Tighter fiscal stance to support disinflation -4

At 4.9% of GDP, the 2024 government deficit was 10

in line with the revised target. Earthquake-related

-6 0
expenditure remained significant at 2.3% of GDP, 17 18 19 20 21 22 23 24 25 26
but it was down from 3.6% of GDP in 2023, Gross debt (rhs) Budget balance (lhs)

contributing the most to the lower deficit outturn.

The 2025 budget projects a sizeable reduction of the central government budget deficit to 3.1% of
GDP, mostly reflecting the winding down of earthquake reconstruction spending and the
authorities’ determination to support disinflation. As the macroeconomic assumptions underlying
the budget seem optimistic, tax revenue is expected to be lower and the budget deficit higher than
the budget plan. However, government indebtedness is forecast to remain largely unchanged at
moderate levels.

Table III.35.1: Main features of country forecast – TÜRKIYE

2024 Annual percentage change

bn TRY Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 43410.5 100.0 4.8 11.4 5.5 5.1 3.2 2.8 3.5
Private Consumption 25804.9 59.4 4.3 15.4 18.9 13.6 3.7 3.5 3.5
Public Consumption 6400.5 14.7 5.2 3.0 4.2 2.4 1.2 1.0 1.4
Gross fixed capital formation 13456.6 31.0 5.6 7.2 1.3 8.4 3.9 1.3 3.6
Exports (goods and services) 12174.5 28.0 4.5 25.1 9.9 -2.8 0.9 1.2 3.9
Imports (goods and services) 12058.0 27.8 3.9 1.7 8.6 11.8 -4.1 0.6 3.3
GNI (GDP deflator) 42966.6 99.0 : 11.4 5.9 4.9 3.3 2.5 3.4
Contribution to GDP growth: Domestic demand 4.9 11.2 11.3 10.5 3.6 2.6 3.4
Inventories -0.1 -6.5 -6.3 0.7 -2.1 0.0 0.0
Net exports 0.2 6.8 0.5 -6.1 1.7 0.2 0.2
Employment : 7.5 6.6 2.9 3.1 1.3 2.6
Unemployment rate (a) 10.4 12.0 10.5 9.4 8.8 9.1 8.9
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator : 29.0 96.0 68.2 58.5 37.6 23.6
Consumer price index 9.6 19.6 72.3 53.9 58.5 36.2 22.7
Terms of trade goods : : : : : : :
Trade balance (goods) (c) -6.4 -3.6 -9.9 -7.7 -4.3 -3.5 -3.5
Current-account balance (c) -4.0 -0.8 -5.0 -3.6 -0.8 -0.8 -1.0
General government balance (c) -2.1 -1.1 -2.1 -4.8 -4.9 -3.5 -2.9
Structural budget balance (d) : : : : : : :
General government gross debt (c) 35.9 40.4 30.8 29.2 25.3 23.8 23.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

163
 36. UKRAINE

While the economy continued to show resilience to Russia’s war of aggression, growth
momentum weakened in the second half of 2024 due to intensified attacks on critical
infrastructure, which disrupted energy supply and increased production costs. As the war
continues to weigh heavily on productive capacity and business sentiment, growth is forecast to
slow further to 2.0% in 2025, before rebounding to 4.7% in 2026 as early reconstruction efforts
are assumed to take hold. Inflation is projected to rise to 12.6% in 2025, driven by surging energy
and labour costs, before easing in 2026 as supply-side pressures abate. Persistent spending
needs are expected to keep the public deficit elevated throughout the forecast horizon.

Economic growth weakened in 2024 …

Following robust growth that continued through early 2024, Ukraine’s economy began to lose
momentum in mid-2024, reflecting the intensification of Russia’s attacks on critical infrastructure,
a weaker agricultural harvest due to adverse weather conditions, and acute labour shortages,
which continued to constrain economic activity. Despite the positive impact of the Black Sea export
corridors and strong consumption growth, real GDP growth lost pace through 2024 and turned
negative in 2024-Q4 (-0.1% y-o-y), leaving annual real GDP growth at 2.9% in the year.

…and is expected to remain subdued amid ongoing war-related disruptions

In 2025, economic activity is forecast to Graph III.36.1: Ukraine - Real GDP growth and contributions
decelerate further to 2.0%, as the war continues
20 pps. forecast
to weigh heavily on Ukraine’s productive capacity
and business sentiment. Exports are set to 10
weaken, reflecting subdued industrial output— 0
particularly in energy-intensive sectors affected
by high energy costs—and the closure of the -10
Pokrovsk coal mine, a key supplier to the steel -20
industry. Agricultural exports are also expected to
-30
decline due to lower stocks following the poor
2024 harvest caused by adverse weather -40
17 18 19 20 21 22 23 24 25 26
conditions. At the same time, strong import
demand for energy, coal, and materials related to Net exports Investment Priv. consumption

defence and reconstruction is set to keep import Gov. consumption Inventories Real GDP (y-o-y%)

levels elevated, resulting in a negative

contribution of net exports to GDP growth. Domestic demand is expected to remain resilient, driven
by robust investment growth underpinned by sustained defence spending and ongoing emergency
repairs and reconstruction, particularly in the energy sector. Private consumption is also projected
to remain a key growth driver, although at a slower pace, as elevated inflation continues to erode
households’ purchasing power.
Looking ahead to 2026, real GDP growth is projected to accelerate to 4.7%, under the technical
assumption that conditions for a gradual increase in early reconstruction efforts will be in place
from the start of the year. The recovery is expected to be driven by rising reconstruction
investment, easing export bottlenecks, and improving economic confidence, which should outweigh
the dampening effect of a gradual decline in defence-related spending. The current account is
expected to remain firmly negative throughout the forecast horizon, reflecting a large trade deficit
and a weakening secondary income balance as international grants are replaced by loans.
The forecast is subject to extremely high uncertainty, with risks tilted to the downside. A
deterioration of the security situation could intensify the destruction of critical infrastructure,
further disrupt seaborne exports and deepen labour shortages through continued high mobilisation
and outward migration. On the upside, a faster improvement in the security situation could pave
the way for reconstruction efforts to progress more quickly and at a larger scale.

164
 Candidate Countries, Ukraine

War-related disruptions in the labour market to keep the unemployment rate high
Large-scale displacement, together with conscription, has significantly reduced the labour force
since the start of the invasion, resulting in acute shortages and pushing average nominal wages up
by 23% in 2024. Despite the assumed gradual return of some externally displaced persons, labour
shortages are expected to remain pronounced due to slow reintegration, the lasting impact of the
war on the workforce, and persistent regional and skills mismatches. The unemployment rate is
therefore projected to remain elevated, albeit on a gradually declining path.

Inflation set to increase following a marked drop in 2023 and 2024

After declining sharply throughout 2023 and early 2024, inflation began to accelerate again from
mid-2024, driven by rising production costs—particularly for electricity and labour—, increasing
food prices, and renewed hryvnia depreciation, which raised import costs. While inflationary
pressures are expected to remain elevated over the forecast horizon, they are projected to
gradually ease as tightened monetary policy helps contain price growth and supply shocks fade.
Inflation is therefore forecast to peak at 12.6% in 2025, before moderating to 7.7% in 2026.

Public deficit to remain high amid sizeable war-related expenditure needs

The general government deficit narrowed to an estimated 17.3% of GDP in 2024, supported by the
implementation of revenue mobilisation measures, such as the increase in fuel and tobacco taxes,
which helped offset an increase in public expenditures. In 2025, additional revenue measures—
notably the increase in the military income tax (1.4% of GDP) and the reintroduction of a windfall
tax on bank profits (0.8 % of GDP)—are expected to continue supporting budget revenues.
However, sustained pressure from high war-related spending, particularly on defence, is set to
keep the fiscal deficit elevated at approximately 18.4%. By 2026, stronger economic growth is
projected to support further improvements in revenue collection, while a gradual shift in
expenditure from military needs toward rehabilitation and reconstruction is expected to contribute
to a significant narrowing of the deficit. Public debt is forecast to peak in 2025 and decrease in
2026, underpinned by the projected decrease in the deficit in that year.

Table III.36.1: Main features of country forecast - UKRAINE

2024 Annual percentage change

bn UAH Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 7658.7 100.0 : 3.4 -28.8 5.5 2.9 2.0 4.7
Private Consumption 4776.5 62.4 : 6.8 -27.5 4.3 6.7 4.9 5.0
Public Consumption 2904.3 37.9 : 0.8 31.4 9.2 -4.5 -1.7 -4.5
Gross fixed capital formation 1446.0 18.9 : 9.3 -33.9 65.9 3.5 9.3 14.0
Exports (goods and services) 2252.4 29.4 : -8.6 -42.0 -5.9 10.3 1.8 11.4
Imports (goods and services) 3702.4 48.3 : 14.2 -17.4 8.9 7.7 5.5 6.0
GNI (GDP deflator) 7694.2 100.5 : -1.7 -22.7 2.9 0.7 0.9 4.6
Contribution to GDP growth: Domestic demand 2.3 6.4 -17.9 14.3 2.9 4.2 4.3
Inventories -0.8 6.1 -1.1 -2.0 0.9 0.0 0.0
Net exports -1.8 -9.1 -9.8 -6.7 -0.9 -2.2 0.4
Employment : -1.9 -31.7 -1.6 2.8 3.8 6.6
Unemployment rate (a) : : : : 14.8 13.1 11.6
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator : 24.8 34.9 19.9 12.3 12.6 10.0
Consumer price index 12.3 9.4 20.2 12.8 6.5 12.6 7.7
Terms of trade goods : 25.7 0.4 -2.4 3.3 1.2 0.0
Trade balance (goods) (c) -7.5 -3.3 -9.0 -16.1 -15.9 -16.2 -14.8
Current-account balance (c) -2.1 -1.9 4.9 -5.4 -8.1 -13.2 -11.5
General government balance (c) 0.0 -3.6 -15.4 -19.8 -17.3 -18.4 -10.6
Structural budget balance (d) : : : : : : :
General government gross debt (c) 61.0 49.0 77.8 83.3 89.4 109.8 108.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

165
Other non-EU Countries
 37. THE UNITED KINGDOM

After ending 2024 on a weak footing, the UK economy is forecast to grow modestly in both 2025
and 2026. Private consumption and investment remain subdued, though lower interest rates and
energy prices are expected to provide some support ahead. Inflation is projected to tick up slightly
in coming months, before gradually subsiding as the labour market loosens further. Fiscal policy
is set to remain restrictive. Risks are tilted to the downside. While there is scope for domestic
demand to pick-up more rapidly than projected if saving rates fall back from current high levels,
uncertainty remains high, sentiment weak, and external risks are exceptionally elevated.

Growth stalled in late 2024, and momentum remains weak

The UK economy grew by 1.1% in 2024 and began 2025 with weak momentum. Private
consumption and investment were both subdued in 2024, while public consumption and public
investment provided significant support to demand. Growth in exports was also weak, with goods
trade volumes (excluding precious metals) falling by close to 5%, though services exports were
much more buoyant. Import growth was somewhat stronger for both goods and services. The UK
economy grew by just 0.1% in 2024-Q4, and high frequency indicators have worsened in recent
months. Services PMIs were above 50 in early 2025 but fell in April to 48.9. Manufacturing PMIs
have been below 50 since September 2024 and were at 45.4 in April. Retail sales showed a little
more strength, being up over 2% y-o-y in January, but this momentum slowed in February and
March. Consumer confidence measures have also slipped back since the start of 2025. The latest
monthly GDP growth estimates have been volatile, being flat in January 2025, then rising by 0.5%
m-o-m in February, though this relatively strong reading may be weather related.
Overall, GDP growth is expected to be 1% in Graph III.37.1: The United Kingdom - Real GDP growth and
2025, rising to 1.3% 2026. The household contributions
savings rate is projected to stabilise in 2025 and 10 pps. forecast
edge down in 2026 as interest rates fall. Private
consumption is expected to grow by around 1% in 5

2025 and 1.4% in 2026, with some support from

0
the fall in energy prices, relative to the Autumn
Forecast. Despite the tight overall fiscal stance, -5
both public consumption and investment are
expected to grow quite strongly in 2025 before -10
moderating in 2026. With uncertainty high and
-15
real interest rates still elevated, private 17 18 19 20 21 22 23 24 25 26

investment - including residential and business Net exports Investment Priv. consumption
investment - is projected to remain soft in 2025 Gov. consumption Inventories Real GDP (y-o-y%)
and to recover only in 2026. Goods exports are
expected to remain weak, with little prospect of a strong recovery given the less supportive
external climate, with the new US tariffs, an appreciation of the sterling exchange rate, and slower
growth in the EU than projected in the Autumn. However, services trade remains buoyant, and
services imports and exports are expected to grow steadily over the forecast horizon.

The labour market has loosened, but the extent of slack remains hard to assess
The UK labour market has loosened in recent months, with vacancies continuing to fall, and the
vacancy to unemployment rate now at pre-pandemic levels. The unemployment rate has risen
gradually from 4% in mid-2024 to 4.4% in March 2025, with labour force growth a little faster
than employment growth. However, the data from the Labour Force Survey remains impaired by a
steep decline in response rates. Other metrics (e.g. KPMG/Recruitment and Employers
Confederation report on jobs and the Bank’s Decision Maker’s Panel survey) have also weakened in
recent months. Labour market slack is expected to rise in 2025 and nominal wage growth to
gradually slow, though from relatively high levels of close to 5%.

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 Other non-EU Countries, The United Kingdom

Inflation has fallen back significantly, though services inflation is slowing more gradually
Headline CPI inflation fell back from 3% in January to 2.6% in March, still above the Bank of
England’s 2% target. Inflation excluding energy and food falling from 3.7% to 3.4%. Services
inflation also fell back, but at 4.7% in March remains much higher. Higher regulated prices are
expected to push up the CPI in coming months, though the recent sharp fall in energy prices for
both gas and oil is set to work in the opposite direction, and underlying inflationary pressures
appear to be weakening. With the labour market loosening, nominal wage inflation and services
inflation are both expected to subside further in coming months, though headline CPI inflation may
not return to target levels until well into 2026. The Bank of England cut the main policy rate by 25
bps to 4.5% in February, and markets expect further cuts in the coming months.

Public finances to improve only slowly, as taxes and spending both rise
The government’s Spring Statement in March made only modest fiscal adjustments, with some
slight increases in total spending and net borrowing. The fiscal stance is still projected to tighten
significantly in both 2025 and 2026, reflecting the sizeable tax rises announced in the October
2024 budget. Revenues are expected to rise by close to 1pp of GDP in each of 2025 and 2026.
Expenditure is set to remain stable as a share of GDP, in line with spending plans, implying a lower
public deficit over the forecast horizon. The general government deficit is nevertheless expected to
remain close to 4.5% of GDP in 2026, above the pace of nominal GDP growth, and general
government debt is projected to rise modestly over the forecast horizon.

Risks are tilted to the downside

The outlook for consumption is a key risk factor, with scope for lower interest rates to lower
precautionary savings and raise consumption more than projected. Private investment is set to
pick-up in 2026, but with domestic demand sluggish, and significant uncertainty around the
external environment, this projection has downside risks. Finally, there also important risks around
inflation and nominal wage growth, and hence the outlook for policy interest rates, given the
difficulties in assessing labour market outcomes and the extent of slack.

Table III.37.1: Main features of country forecast - UNITED KINGDOM

2024 Annual percentage change

bn GBP Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 2851.0 100.0 0.7 8.6 4.8 0.4 1.1 1.0 1.3
Private Consumption 1770.9 62.1 0.6 7.2 7.4 0.5 0.6 1.0 1.4
Public Consumption 598.5 21.0 0.8 14.3 0.6 1.6 3.0 3.3 1.3
Gross fixed capital formation 496.1 17.4 1.1 7.6 5.1 0.3 1.5 0.6 1.5
Exports (goods and services) 873.5 30.6 2.0 3.2 12.6 -0.4 -1.2 0.4 1.5
Imports (goods and services) 905.8 31.8 1.9 5.8 13.0 -1.2 2.7 1.6 1.5
GNI (GDP deflator) 2825.9 99.1 0.5 11.6 4.8 -1.8 1.9 1.2 1.4
Contribution to GDP growth: Domestic demand 0.8 8.8 5.5 0.7 1.3 1.4 1.4
Inventories 0.0 0.4 -0.5 -0.7 1.1 0.1 0.0
Net exports 0.0 -0.7 -0.2 0.3 -1.3 -0.4 0.0
Employment 0.8 0.0 1.2 1.2 0.8 0.3 0.4
Unemployment rate (a) 5.9 4.5 3.8 4.0 4.3 4.4 4.4
Compensation of employees / head 2.5 4.3 6.3 6.8 5.1 3.7 2.2
Unit labour costs whole economy 2.6 -3.9 2.7 7.7 4.8 3.0 1.3
Saving rate of households (b) 8.6 12.7 6.0 7.3 10.1 10.4 10.1
GDP deflator 2.2 0.1 5.4 6.9 4.0 3.0 1.9
Consumer price index (CPIH) (e) 2.1 2.5 7.9 6.8 3.3 3.6 2.6
Terms of trade goods 0.6 0.1 -2.3 0.8 3.4 1.4 -0.2
Trade balance (goods) (c) -6.3 -7.1 -8.2 -7.7 -7.9 -8.1 -8.1
Current-account balance (c) -3.5 -0.4 -2.1 -3.5 -2.7 -2.6 -2.6
General government balance (c) -5.5 -7.8 -4.6 -6.0 -6.0 -5.3 -4.4
Structural budget balance (d) : : : : : : :
General government gross debt (c) 74.8 105.1 99.6 100.4 101.3 102.6 103.8
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP. (e) CPIH is consumer
price index which includes costs of owner-occupied housing

169
 38. THE UNITED STATES

The US economic growth is expected to moderate and expand by 1.6% both in 2025 and 2026,
while consumer price inflation is set to take longer to return to the 2% inflation target. The
outlook is subject to exceptionally large risks, especially if the trade tensions escalate further.
Major sources of additional policy uncertainty are related to the new administration’s fiscal and
immigration policy and the future Fed policy rate path.

Robust economic growth is expected to moderate

US real GDP expanded strongly by 2.8% in 2024, Graph III.38.1: The United States - Real GDP growth and
with economic growth mainly driven by private contributions
consumption, together with solid investment and 8 pps. forecast
government consumption growth. Employment
continued to expand, though at a slowing pace, 6

with the unemployment rate hovering just above 4

4%. Although private consumption and
2
investment continued to grow at a solid pace in
Q1, an apparent shift towards foreign imports in 0

anticipation of tariffs led to a surprise 0.1% q-o-q -2

GDP contraction.
-4
The abrupt protectionist shift in US trade policy 17 18 19 20 21 22 23 24 25 26

and soaring uncertainty have triggered a sharp Net exports Investment Priv. consumption
deterioration in sentiment indicators. The Gov. consumption Inventories Real GDP (y-o-y%)
University of Michigan consumer index sentiment
plunged from 71.1 in January to 52.2 in April, and similar negative trends are visible in US
companies’ investment intentions and business outlook expectations. The March small businesses
sentiment survey (NFIB) shows that business uncertainty is at around record high levels. Headline
PMIs have worsened since December, mainly on a weakening services sector, with the services PMI
falling to 51.4 in April from 56.8 in December. The manufacturing PMI slightly improved to 50.7 in
April, up from 49.4 in December, consistent with businesses stockpiling in anticipation of tariffs.
The unprecedented increase in the effective tariff rate on US imports and an elevated policy
uncertainty are expected to curb private consumption and investment. As disposable income
growth falters due to higher inflation, household consumption is forecast to moderate from 2.8%
in 2024 to 2% in 2025 and 1.3% in 2026. With economic activity expected to soften, the
unemployment rate is forecast to edge up to 4.3% in the current year and to 4.5% in 2026. Facing
elevated uncertainty, higher input prices due to tariffs and declining corporate profits, investment
activity is projected to weaken. Higher tariffs and a weaker dollar are set to reduce imports growth,
while less dynamic global demand and costlier production inputs are expected to weigh on exports.
The current account balance is projected to improve moderately, with net trade contributing
positively to the economic growth in 2026.
Overall, the US economy is forecast to grow by 1.6% both in 2025 and 2026. This is lower by
0.5pp for 2025 and by 0.6pp for 2026, relative to the Autumn Forecast (noting that the
uncertainty is particularly large for the outlook for the US).

Temporary surge of inflation due to tariffs

Headline CPI inflation edged down from 3% in January to 2.4% in March. Nevertheless, inflation is
expected to rebound later this year as the higher cost of imported goods and intermediate inputs is
passed through to consumer prices. CPI inflation is expected to reach 3% in 2025, moderating to
2.3% in 2026 (up by 1 pps for 2025 and 0.3 pps for 2026 relative to the Autumn Forecast).
The Federal Reserve Board (FRB) started a rate cutting cycle in September 2024, but it has left
interest rates unchanged since December 2024, due to uncertainty over the inflation outlook. The

170
 Other non-EU Countries, The United States

FRB members’ projections released in March suggested two rate cuts in 2025 (the same as in their
January meeting), but the rate outlook is highly uncertain: a weakening economy, rising
unemployment and a risk of an inflation rebound may put the Fed’s legally established dual goals
of maximizing employment and achieving price stability in tension.

The fiscal deficit is forecast to remain elevated

The general government deficit is expected to remain high over the forecast horizon. The large
primary deficit of 2.9% of GDP in 2024 suggests that US fiscal policy remains relatively loose
despite continued strong economic growth. The additional revenue from tariffs could (initially) be
substantial and help narrowing the fiscal deficit, even as weaker economic activity is set to reduce
other revenues. On the expenditure side, interest payments on government debt are forecast to
remain high. Accordingly, the general government deficit is projected to decline, but remain
elevated over the forecast horizon, edging down from 7.5% of GDP in 2024 to 5.8% of GDP in
2026. The general government debt is projected to keep increasing from 124.1% of GDP in 2024
to 126.2% of GDP in 2026.

Risks are large and mostly tilted to the downside

The future policies of the US administration constitute a major source of uncertainty for the
outlook. A de-escalation of trade tensions and the reduction in tariff rates could provide a short-
term boost to economic activity, while a further escalation of trade tensions could further dampen
the economic outlook. New or stricter immigration restrictions could provoke an emergence of
labour supply deficits fuelling wage and price inflation and depressing potential growth. Higher-
for-longer policy rate and a further tightening in financial conditions could fuel financial market
volatility and further depress consumption and investment. The fiscal outlook is a particular source
of uncertainty. If the domestic tax cuts announced by the White House will be enacted, the fiscal
deficit could widen again from next year. A more expansionary fiscal policy than currently assumed
represents an upside risk to the 2026 economic outlook, though it could exacerbate inflationary
pressures and lead to tightening of financial conditions.

Table III.38.1: Main features of country forecast - UNITED STATES

2024 Annual percentage change

bn USD Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 29184.9 100.0 1.6 6.1 2.5 2.9 2.8 1.6 1.6
Private Consumption 19825.3 67.9 1.7 8.8 3.0 2.5 2.8 2.0 1.3
Public Consumption 3916.7 13.4 0.9 0.4 -1.1 2.9 2.5 1.3 1.2
Gross fixed capital formation 6294.0 21.6 1.8 5.4 2.0 3.2 4.3 1.4 1.7
Exports (goods and services) 3180.2 10.9 2.8 6.5 7.5 2.8 3.3 1.7 1.6
Imports (goods and services) 4083.3 14.0 2.0 14.7 8.6 -1.2 5.3 1.4 -0.3
GNI (GDP deflator) 29243.1 100.2 1.7 5.7 2.4 2.7 2.6 1.6 1.6
Contribution to GDP growth: Domestic demand 1.7 7.1 2.3 2.8 3.1 1.8 1.4
Inventories 0.0 0.2 0.5 -0.4 0.0 -0.2 0.0
Net exports 0.0 -1.3 -0.4 0.5 -0.4 0.0 0.2
Employment 0.4 3.3 3.7 1.8 0.8 0.7 0.5
Unemployment rate (a) 6.2 5.3 3.6 3.6 4.0 4.3 4.5
Compensation of employees / head 3.0 5.1 2.9 3.6 4.1 4.2 3.3
Unit labour costs whole economy 1.7 2.4 4.1 2.4 2.1 3.3 2.2
Saving rate of households (b) 11.6 16.7 9.5 11.0 10.3 10.0 9.6
GDP deflator 1.9 4.6 7.1 3.6 2.4 2.7 2.1
Consumer price index 2.0 4.7 8.0 4.1 2.9 3.0 2.3
Terms of trade goods 0.0 6.0 3.8 -1.1 -0.9 0.2 -0.3
Trade balance (goods) (c) -4.7 -4.6 -4.6 -3.9 -4.1 -4.0 -3.8
Current-account balance (c) -3.1 -3.7 -3.9 -3.3 -3.7 -3.6 -3.4
General government balance (c) -7.4 -11.8 -3.7 -7.6 -7.5 -6.7 -5.8
Structural budget balance (d) : : : : : : :
General government gross debt (c) 93.9 125.1 120.8 122.7 124.1 125.4 126.3
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.
(*) Employment data from the BLS household survey.

171
 39. JAPAN

After an almost stagnant 2024, economic activity in Japan is expected to pick up to 0.7% in
2025. While domestic demand is projected to be the main driver of growth over the forecast
horizon, it is expected to remain relatively subdued due to heightened uncertainty. Growth is
projected to stabilise at around 0.6% in 2026. Headline inflation is expected to gradually taper off
but remain above the central bank’s target of 2% over the forecast horizon. Public finances are
projected to remain in deficit, but the general government debt-to-GDP ratio is set to decline
slightly below 246% driven by the denominator effect.

Growth is expected to recover modestly after coming to a standstill in 2024

Japan's GDP growth decelerated sharply to 0.1% in 2024 from a 1.5% expansion a year earlier.
Real GDP contracted by 0.5% q-o-q in the first quarter of 2024 amid lacklustre household
spending and fraudulent vehicle certifications which weighed on exports. Growth picked up in
subsequent quarters, averaging 0.6% q-o-q on the back of recovering private demand, reflecting
rising wages, record-high tourism supporting services exports, and ongoing fiscal stimulus.
The economy entered 2025 on a solid footing Graph III.39.1: Japan - Real GDP growth and contributions
with PMIs continuing their recovery from the end
3 pps. forecast
of 2024. However, March figures suggest a
2
turning point as manufacturing PMI slid further
1
into contractionary territory and services PMI
halted just above the threshold. In addition, retail 0

sales declined in February compared to the same -1

period last year as consumer confidence -2

continued to deteriorate throughout March. -3

Following moderate growth in the first quarter, -4

the economy is expected to largely stagnate for -5

17 18 19 20 21 22 23 24 25 26
the rest of the year, held back by political
uncertainty domestically and the impact of US Net exports Investment Priv. consumption

trade protectionism. Gov. consumption Inventories Real GDP (y-o-y%)

The projected real GDP growth of 0.7% is thus

largely driven by the carry-over from last year. Private consumption growth is expected to recover
in 2025, albeit gradually, as persistent inflation continues to weigh on living costs despite support
from strong wage growth, energy subsidies and income tax cuts. Private investment growth,
especially in green and digital transitions, is projected to remain robust, underpinned by historically
high levels of corporate profits and persistent negative real interest rates. Public consumption is
also expected to contribute positively to 2025 growth. On the external side, export growth is
forecast to pick up moderately as goods exports recover following a fall in 2024 and services
exports continue to expand on the back of sustained tourism inflows. Overall, the contribution of
net exports to growth is set to be broadly neutral. In 2026, GDP growth is projected to remain
relatively subdued as uncertainty continues weighing on households’ and companies’ decisions and
external demand remains weak.
Risks to the outlook are tilted to the downside. US trade policies could have a more cooling impact
on spending decisions of companies and on global growth. In addition, persistently high inflation
(by Japanese standards) could curb private consumption more than expected. On the positive side,
a possible pause in further monetary tightening could ease financing conditions, supporting
investment and household spending.

Tight labour market and high inflation push up wages

The labour market tightened at the beginning of the year, with the unemployment rate edging
down to 2.4% in February 2025 from 2.5% in January, the first improvement in five quarters. This

172
 Other non-EU Countries, Japan

is largely due to rapid population ageing and only modest increases in immigration, despite recent
policy changes aimed at boosting inflows. The unemployment rate is projected to remain broadly
stable at 2.5% in both 2025 and 2026, with persistent sectoral labour gaps. The 2025 annual
spring wage negotiations resulted in wage increases exceeding 5%, surpassing last year’s three-
decade record and reflecting persisting cost-of-living pressures. However, overall wage growth is
expected to be more moderate given limited union participation and the constrained ability of
SMEs to offer significant raises. Still, average compensation per employee is forecast to grow by
2.9% in 2025 before easing to 2.1% in 2026, in line with moderating inflation.

Sticky inflation to gradually decline

Headline inflation eased to 3.7% in February from 4% in the previous month, despite the
resumption of government energy subsidies. Growth of fresh food prices declined but remained
high at 18.8% (rice prices grew 60% y-o-y). Services inflation appears to be consolidating around
2%. Going forward, inflation is projected to decrease gradually, averaging 2.6% in 2025 and 2.3%
in 2026. The increased uncertainty produced by US trade policy and a weakening economic outlook
could delay future monetary tightening.

Fiscal deficit remains elevated

The general government deficit reached 2.3% of GDP in 2023 and is forecast to have widened
further to 2.5% of GDP in 2024, reflecting increased military spending, cash payouts to low-
income households, and the expansion of subsidies to reduce gasoline and utility outlays. The
fiscal year 2025 budget raised the tax-free allowance on personal income tax, effectively reducing
fiscal revenues. On the expenditure side, the most significant cost pressures are expected to come
from social security benefits; an increase in defence spending (up 9.4% year-on-year); additional
support to the green transition, AI, and semiconductor industries; renewed energy subsidies; and
soaring debt servicing costs. As a result, the deficit is projected to widen to 2¾% of GDP in 2025
and further to 3% of GDP in 2026. The general government debt-to-GDP ratio is expected to
remain elevated, though it is projected to decline below 246% by the end of the forecast horizon,
driven by rising nominal GDP.

Table III.39.1: Main features of country forecast - JAPAN

2024 Annual percentage change

bn JPY Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 609432.7 100.0 0.3 2.7 0.9 1.5 0.1 0.7 0.6
Private Consumption 329800.4 54.1 0.1 0.7 2.1 0.8 0.0 0.6 0.5
Public Consumption 125656.5 20.6 1.3 3.4 1.4 -0.3 0.9 1.0 0.8
Gross fixed capital formation 159389.8 26.2 -0.1 0.5 -0.6 1.5 0.3 0.6 0.3
Exports (goods and services) 138644.9 22.7 2.1 11.9 5.5 3.0 1.0 1.8 1.3
Imports (goods and services) 144586.8 23.7 1.8 5.2 8.3 -1.5 1.3 1.6 1.3
GNI (GDP deflator) 648701.2 106.4 0.4 3.8 2.3 1.3 0.6 0.3 0.4
Contribution to GDP growth: Domestic demand 0.3 1.2 1.3 0.8 0.3 0.7 0.5
Inventories 0.0 0.4 0.2 -0.3 -0.1 0.0 0.0
Net exports 0.1 1.0 -0.5 1.0 -0.1 0.0 0.0
Employment 0.3 -0.1 0.2 0.4 0.5 0.4 0.2
Unemployment rate (a) 3.7 2.8 2.6 2.6 2.6 2.5 2.5
Compensation of employees / head -0.1 2.0 1.9 1.5 2.8 2.9 2.1
Unit labour costs whole economy -0.1 -0.8 1.1 0.3 3.2 2.6 1.7
Saving rate of households (b) 10.7 14.6 11.9 8.9 9.8 9.9 9.8
GDP deflator -0.2 -0.2 0.4 4.1 2.9 2.0 1.9
Consumer price index 0.3 -0.2 2.5 3.3 2.7 2.6 2.3
Terms of trade goods -1.5 -9.1 -13.3 6.4 3.7 -0.2 -0.4
Trade balance (goods) (c) 0.5 0.3 -2.8 -1.1 -0.6 -0.8 -0.9
Current-account balance (c) 2.9 3.9 2.0 3.8 4.8 4.4 4.3
General government balance (c) -5.5 -6.1 -4.2 -2.3 -2.5 -2.8 -3.0
Structural budget balance (d) : : : : : : : : :
General government gross debt (c) 214.6 253.7 256.9 250.1 247.8 246.4 245.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

173
 40. CHINA

Following a relatively strong performance in 2024, the Chinese economy is poised for a more
challenging period as it navigates unprecedented external headwinds and persistent domestic
vulnerabilities. Real GDP growth reached 5% in 2024, driven by resilient domestic demand,
supported by government policies, and a strong rebound in exports. However, unresolved
weaknesses in the property sector and prohibitively high U.S. tariff measures are expected to
weigh on growth prospects. The outlook for 2025 and 2026 points to a more domestically driven
expansion, underpinned by fiscal stimulus, proactive investment incentives, and some measures
to bolster household consumption. Despite these efforts, growth is projected to slow down
markedly to 4.1% in 2025 and 4.0% in 2026, as unfavourable trade prospects and structural
headwinds increasingly constrain economic activity.

A robust external sector and a more decisive policy stimulus underpin growth
After a notable rebound in 2023, the Chinese economy grew by 5% in 2024, exceeding
expectations and meeting the official target of “around 5%”. Growth was supported by an
unusually high contribution of net exports. Robust export performance, especially in the second
half of the year, and more moderate imports boosted the growth contribution of the external
sector, reversing the modest drag observed in 2023. In addition, the Autumn’s government policy
package reinvigorated growth towards the end of the year. Still, domestic demand has remained
constrained by relatively subdued consumption and an unresolved property crisis, which led real
estate investment to decline by over 10% in the year.
Real GDP growth in the first quarter of 2025 maintained the momentum of the last quarter of
2024, reaching 5.4% y-o-y (1.2% q-o-q). Growth was supported by strong household spending,
growing also by 5.4% y-o-y. Investment growth accelerated to 4.2% y-o-y, largely driven by State-
Owned Enterprises and with private investment growing only marginally. Exports maintained the
strong momentum, as many US importers anticipated the impact of tariffs by advancing
purchases, thereby further widening the trade surplus.
Graph III.40.1: China - Real GDP growth and contributions
Domestic demand takes the lead as external
pressures mount 10 pps.
9
forecast
Growth over the forecast horizon is expected to 8
be driven by domestic demand, supported by a 7
6
series of proactive policy measures. Further 5
fuelled by the shock that US tariffs are exerting 4
on external demand, Chinese authorities have 3
declared the expansion of domestic demand as 2
1
its top policy priority for 2025. Consumption is 0
expected to be supported by several household -1
consumption support programs, including the 17 18 19 20 21 22 23 24 25 26

nationwide trade-in scheme that offers subsidies Net exports Investment Consumption

and incentives for replacing old appliances and Domestic demand Real GDP (y-o-y%)

vehicles with newer, greener models. While the

ongoing property sector crisis continues to weigh on residential construction, some signs of
stabilization are starting to emerge in transactions and price data, which could be a precursor of
renewed buyer confidence. In parallel, the government is accelerating fiscal policy implementation,
notably through an expanded issuance of government bonds and increased fiscal spending, which
should stimulate infrastructure investment. Meanwhile, large-scale equipment renewal programs
continue to encourage firms to upgrade their capital stock, sustaining private sector investment
even in the currently challenging external environment.
Net exports are projected to make a negligible contribution to GDP growth in 2025 and are
expected to become a mild drag on growth in 2026. With the tariff escalation in the U.S.

174
 Other non-EU Countries, China

increasingly focused on China, exports to the U.S. are expected to sharply decline as early as the
second quarter of 2025. Although surrounded by an unusually large degree of uncertainty on how
this bilateral trade war may play out and where trade diversion through third countries may
partially offset the impact, the loss of direct access to the U.S. market is likely to weigh heavily on
Chinese exports, resulting in stagnating goods export volumes over 2025 and 2026. Import growth
is also expected to remain subdued, reflecting still-weak domestic demand. As a result, the current
account surplus is forecast to narrow to 1.7% of GDP in 2025 and further to 1.2% of GDP in 2026.
Against this backdrop, GDP growth is projected to undershoot the government's target of “around
5%” in 2025, reaching 4.1%, before stabilising at 4.0% in 2026.

Policy support to mitigate external headwinds

At the March National People’s Congress, China maintained its 2025 growth target at “around 5%”
— an ambitious goal given the rapidly worsening external environment. To support it, the
government announced a more expansionary fiscal stance. Local government and “ultra-long” bond
quotas were increased sharply, alongside new funding to recapitalise major state banks, pointing
to higher fiscal impulse. Monetary policy is set to remain accommodative, but further easing will
likely depend on the stability of the renminbi, which is under growing depreciation pressure amid
escalating trade tensions with the U.S.
The primary downside risk to China’s growth stems if the more aggressive U.S. trade policy is
sustained at this level. The concern goes beyond the immediate impact of higher tariffs on Chinese
exports, as it could also undermine business and consumer confidence within China. If such effects
materialise, the current level of fiscal support may fall short in cushioning China’s economy or in
countering emerging disinflationary trends. Apart from a few top-tier cities, the property sector in
China shows only modest signs of recovery, with government interventions having limited impact
on boosting sales or reducing inventory. At the same time, weak job creation continues to dampen
household income expectations. Looking ahead, structural imbalances are expected to remain a
drag on China’s medium-term growth prospects. A heavy debt load, sluggish productivity gains,
declining investment returns, and unfavourable demographic trends are all constraining potential
growth and highlighting the need to shift away from state-led investment toward a more balanced
model driven by private sector activity and domestic consumption.

Table III.40.1: Main features of country forecast - CHINA

2023 Annual percentage change

bn CNY Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 129427.2 100.0 8.5 8.6 3.1 5.4 5.0 4.1 4.0
Private consumption 51212.1 39.6 - - - - - - -
Public consumption 22247.4 17.2 - - - - - - -
Gross fixed capital formation 52359.0 40.5 - - - - - - -
Exports (goods and services) 24794.6 19.2 8.7 18.5 -0.2 1.8 11.1 1.2 0.4
Imports (goods and services) 22109.9 17.1 7.9 11.1 -3.0 6.3 3.3 0.4 1.9
GNI (GDP deflator) - - - - - - - - -
Contribution to GDP growth: Domestic demand - - - - - - -
Inventories - - - - - - -
Net exports - - - - - - -
Employment - - - - - - -
Unemployment rate (a) 4.3 5.1 5.5 5.1 5.1 - -
Compensation of employees/head - - - - - - -
Unit labour costs whole economy - - - - - - -
Saving rate of households - - - - - - -
GDP deflator 3.5 4.5 1.9 -0.5 -0.7 -0.5 0.0
Consumer price index (c) 2.6 0.9 2.0 0.2 0.2 - -
Terms of trade goods (b) - - - - - - -
Trade balance (goods) (b) 4.0 3.1 3.6 3.3 4.1 3.5 2.9
Current-account balance (b) 3.6 1.9 2.4 1.4 2.3 1.7 1.2
General government balance (b) - - - - - - -
Structural budget balance - - - - - - -
General government gross debt (b) - - - - - - -
(a) urban unemployment, as % of labour force. (b) as a percentage of GDP. (c) national indicator.

175
 41. EFTA

The subdued international demand also affected the EFTA economies in 2024. The outlook for
these countries is for moderate economic growth in 2025 and 2026, reflecting further weakened
external demand, while domestic demand is likely to remain resilient. Inflation is projected to
continue moderating, supporting disposable income and domestic demand. Public finances are
expected to remain sound despite a challenging environment.

Switzerland
Output growth accelerated from 0.7% in 2023 to 1.3% in 2024, although, when correcting for
accounting effects, actual economic growth in Switzerland remained at around 1%. On the
production side the main contributor to growth was the pharmaceutical industry, while the metal
and machinery industry registered a weaker performance, in particular in the second half of 2024.
On the expenditure side, private consumption remained solid, benefiting from a resilient labour
market and declining inflation, which decreased from 2.1% in 2023 to 1.1% in 2024, mainly
thanks to lower energy prices and a strong currency. In response to weakening inflation, the Swiss
National Bank lowered its policy rate in four steps, from 1.75% to 0.5%. The exchange rate
continued to appreciate during 2024 in early 2025 mainly reflecting the CHF’s status as a safe-
haven currency.
Private consumption is expected to remain the Graph III.41.1: Switzerland - Real GDP growth and
primary driver of growth, fuelled by a robust contributions
labour market and rising real wages in the Graph II.37.1: Switzerland - Real GDP growth and
context of moderate inflation. Investment growth pps.
contributions
10 forecast
is projected to remain subdued in view of the
8
uncertain international environment. Exports are 6
likely to be affected by tariff increases for 4
exports to the US, which account for some 10% 2
of total exports. However, a large share of exports 0
is in less price sensitive sectors, like watches or -2
machinery, which might dampen the negative -4
impact on Swiss exports. Overall, GDP growth -6
might decelerate to slightly below 1% in 2025 17 18 19 20 21 22 23 24 25 26

and accelerate to about 1½% in 2026. A Net exports Investment

Priv. consumption Gov. consumption
significant part of this fluctuation is due to Inventories Real GDP (y-o-y%)
accounting effects.
Inflation is expected to remain subdued in 2025 and 2026, reflecting lower international energy
prices and the strength of the Swiss currency. Employment growth is forecast to remain subdued
during the forecast period. Unemployment rates are projected to continue declining, albeit at a
moderate rate, as additional labour demand is likely to be also met by migrant workers from
neighbouring countries. The general government accounts were close to balance in 2024, but are
expected to deteriorate slightly in 2025 and 2026, reflecting below potential output growth. The
debt-to-GDP ratio is set to continue declining, reflecting low fiscal deficits during 2025 and 2026.
Country-specific risks to the outlook stem from the possibility of a continued exchange rate
appreciation, due to the currency’s ‘safe haven’ status at times of international turbulences.

Norway
In spite of a weak fourth quarter, the economy rebounded in 2024, with real GDP expanding by
2.1%. Growth was largely driven by private consumption, supported by higher real disposable
income, mainly as real wages continued to rise strongly. Public consumption slowed down, and
investment dropped, for a second year in a row, largely driven by housing investment. The external
sector made a much larger contribution to growth than in 2023, as export growth accelerated

176
 Other non-EU Countries, EFTA

markedly, reflecting improving price competitiveness due to currency depreciation. Lower global
commodity prices contributed to a further moderation of inflation in the second half of 2024,
bringing average annual inflation to 3.1%, still well above the central bank’s target of 2%. Against
its forward guidance, the Norges Bank’s Executive Board, on 26 March, decided to keep the policy
rate at 4.5%, a 17-year high, unchanged since December 2023. The Bank cited the uptick in
inflation excluding energy and food in the beginning of the year for its decision.
Economic growth is projected to decelerate in Graph III.41.2: Norway - Real GDP growth and contributions
2025, largely due to weaker export growth. Graph II.37.2: Norway - Real GDP growth and
Private consumption is expected to continue its contributions

recovery on the back of further increases in real 6 pps. forecast

wages and robust employment growth. 4
Investment growth is likely to remain moderate. 2
Residential investment is projected to pick up as
of the second half of 2025, amidst a recent rise 0
in the sale of new homes and expectations of -2
rising house prices as well as the long-expected
-4
onset of a policy rate cutting cycle by the central
bank later in the year. Oil-sector investment is -6 17 18 19 20 21 22 23 24 25 2026
bound to lose some traction after two years of Net exports Investment
strong growth, with fewer new projects in the Priv. consumption Gov. consumption
Inventories Real GDP (y-o-y%)
pipeline. The contribution to growth from net
exports is expected to turn slightly negative on
the back of weaker external demand, and increased imports feeding the rise in domestic demand.
Output growth is forecast to strengthen slightly in 2026, mainly driven by a further pick-up in
private consumption growth, on the back of households’ increased purchasing power. The recovery
in investment is projected to continue, albeit at a more moderate level than in 2025, due to the
rebound of housing investment.
The government’s fiscal surplus, at 13.2% of GDP in 2024, is projected to diminish over the
forecast horizon. The sovereign wealth fund, which bolsters fiscal space, gained some 13% in
value in 2024. The 2025 budget implies a moderately expansionary fiscal stance, underpinning
economic growth by government spending. The structural non-oil fiscal deficit is expected to
increase to 10.9% of mainland GDP, with the overall balance remaining firmly in double-digit
surplus, and spending of oil revenues equivalent to 2.5% of the sovereign wealth fund’s assets.
Domestic risks to the outlook are tilted to the downside. Inflationary pressures could intensify if
the currency depreciates further, subject mainly to the development of prices for hydrocarbons.
This could also dampen household spending. Housing investment may continue to be affected by
uncertainty about interest rate developments and by further increasing debt service burden, given
the high level of household debt. Regarding the external environment, the uncertainty about US
trade policy is likely to weigh on export demand, while the volatility of energy prices presents both
upside and downside risks.

Iceland
Real GDP increased by a modest 0.5% in 2024, due to weak growth of private consumption and
the contraction of exports. Private consumption lost steam in 2024 as past inflation depressed real
disposable income, while rising interest rates fostered savings. Export growth faced headwinds
from weak external demand, low fish quotas and a lacklustre tourism season due to volcanic
eruptions. Public consumption and investment continued to support GDP growth, with the latter
mainly driven by business investment in data centres and housing. Inflation tapered off in the
course of 2024, reaching 3.8% in March 2025. The central bank undertook several cuts of the key
interest rate from 9.25% at the beginning of 2024 to 7.75% in March 2025.
The outlook is for a gradual pick-up of growth to 1.7% in 2025 and 2.7% 2026, mostly supported
by domestic demand. Monetary easing is likely to continue gradually in 2025 and give some
impetus to private consumption and investment. Furthermore, private consumption is set to benefit

177
 European Economic Forecast, Spring 2025

from continued population growth and a partial use of accumulated savings. The expansion of
innovation-based sectors, such as pharmaceuticals, biotechnologies, and data centres, are
projected to support investment growth. The uncertain external environment is projected to weigh
on exports in 2025, which would be supported by Graph III.41.3: Iceland - Real GDP growth and contributions
innovation-based sectors and modest growth of Graph II.37.3: Iceland - Real GDP growth and
tourism. Imports are set to increase with high contributions
forecast
investment needs in 2025 but grow more 10 pps.
8
moderately afterwards. The impact of the US 6
import tariffs on Iceland’s exports is highly 4
uncertain. Exports to the US, mainly seafood and 2

medical products, which are currently exempted 0

-2
from import duties, accounted for some 12% of -4
goods exports in 2024. Aluminium is exported -6
mainly to Europe and is therefore not directly -8
-10
affected by import tariffs. The major uncertainty 17 18 19 20 21 22 23 24 25 26
relates to the impact on tourism, as around one Net exports Investment
fourth of tourists visiting Iceland in 2024 were Priv. consumption Gov. consumption
Inventories Real GDP (y-o-y%)
from the US.
Due to lacklustre GDP growth in 2024 the unemployment rate remained broadly unchanged, but is
projected to increase slightly in the next two years. Following the post-pandemic upswing, slower
employment growth is forecast in 2025-2026, in line with historical trends and the projected GDP
profile. Inflation is projected to moderate due to modest consumption growth, low labour cost
growth in line with wage agreements, and rising housing supply, constraining housing costs.
The 2024 budget deficit is estimated at 3.5% of GDP which exceeds the revised target of 1.8%
due to the additional public spending related to the volcanic eruptions. The 2025 budget targets a
deficit of 1.3% of GDP, reflecting some consolidation efforts, while the reinstating of numerical
fiscal rules remains postponed until 2026. A tight fiscal stance is expected for 2025-2026, with
the aim of reducing public debt and supporting disinflation.
Risks to the outlook are negative, stemming from the effect of still high interest rates on domestic
demand, and the impact of the uncertain global environment on exports.

Table III.41.1: Main features of country forecast – EFTA

Iceland Norway Switzerland
(Annual percentage change) 2023 2024 2025 2026 2023 2024 2025 2026 2023 2024 2025 2026
GDP 5.6 0.5 1.7 2.7 0.1 2.1 1.5 1.4 0.7 1.3 0.8 1.5
Private Consumption 0.5 0.6 2.6 3.0 -1.2 1.2 2.1 2.3 1.5 1.8 1.3 1.2
Public Consumption 1.8 2.5 1.9 1.7 3.4 2.4 2.6 2.5 1.7 1.9 1.2 1.1
Gross fixed capital formation 4.3 7.5 3.3 0.6 -1.5 -1.9 1.0 0.5 0.1 -1.0 0.5 1.0
Exports (good and services) 6.3 -1.2 2.0 2.8 0.4 5.7 1.2 1.4 0.7 -0.3 1.9 2.5
Imports (goods and services) -1.0 2.7 4.2 1.4 -1.5 3.7 2.0 2.5 2.7 0.4 2.3 2.2
GNI (GDP deflator) 7.8 0.4 1.7 2.7 2.6 3.3 0.7 0.9 0.3 2.3 0.8 1.5
Contribution to GDP growth: Domestic demand 1.8 2.8 2.7 2.1 -0.1 0.6 1.6 1.6 1.0 0.9 0.9 1.0
Inventories 0.5 -0.5 0.0 0.0 -0.5 -0.7 0.0 0.0 0.9 0.9 0.0 0.0
Net exports 3.3 -1.7 -1.0 0.5 0.7 1.5 -0.1 -0.2 -1.1 -0.4 -0.1 0.5
Employment 4.3 2.2 1.1 1.4 1.3 0.6 0.8 0.6 - 2.2 0.7 0.5 1.0
Unemployment rate (a) 3.5 3.6 4.1 4.0 3.6 4.0 4.0 3.8 4.0 4.3 4.9 4.7
Compensation of employees / head 7.7 4.8 0.9 0.3 6.4 4.8 4.1 4.1 1.2 2.3 1.1 1.6
Unit labour cost whole economy 6.2 6.6 0.4 -1.0 7.7 3.3 3.3 3.2 2.8 1.7 0.9 1.2
Saving rate of households (b) : : : : : : : : : : : :
GDP deflator 5.8 5.9 3.7 2.8 -11.1 -0.2 2.7 3.1 0.9 1.3 0.4 0.9
National index of consumer prices 8.7 5.9 3.7 2.7 5.5 3.1 2.5 2.3 2.1 1.1 0.8 1.2
Terms of trade goods -11.6 0.1 0.1 -0.1 -33.0 -7.5 0.0 0.0 -1.6 -0.6 0.0 0.0
Trade balance (goods) (c) -6.6 -6.8 -7.6 -7.5 16.2 14.6 14.1 13.6 14.0 13.5 13.1 13.0
Current account balance (c) 1.0 -3.2 -3.9 -4.3 16.6 17.1 15.0 13.9 5.7 5.1 4.8 5.1
General government balance (c) -2.0 -3.5 -1.2 -1.0 16.5 13.2 12.0 11.6 0.2 0.1 -0.5 -0.2
General government gross debt (c ) 63.9 66.3 65.1 63.8 44.5 55.1 49.7 43.9 26.0 25.0 25.2 25.0

(a) as % of total labour force. (b) gross saving divided by adjustd gross disposable income. (c)as a % of GDP.

178
42. RUSSIAN FEDERATION

After two years of unexpectedly strong growth, the Russian economy is forecast to cool off
considerably in 2025 and 2026. Despite historically high interest rates, inflation continued
increasing in recent months but is expected to decelerate going forward. Further war-related
spending paired with depressed oil and gas receipts, as well as declining tax receipts due to the
projected economic deceleration, are expected to widen the budget deficit over the forecast
horizon. Accordingly, Russian public debt is also forecast to increase until 2026.

Economic cooling after two years of strong growth

The Russian economy continued expanding at a faster-than-expected pace in 2024, against the
background of strong investment and robust private consumption. The war-driven expansion
carried on but has been dented by Western sanctions, which have partially disrupted key sectors
such as energy, finance, and technology, contributing to higher inflation, supply chain bottlenecks,
and growing pressure on the government budget. In early 2025, clear signs of a slowdown have
been emerging. Real wage growth, which supported household expenditure, slowed to 3.2% in
February, its lowest value in almost two years. High inflation and the protracted high-interest rate
environment, with which the Central Bank has been trying to curb price growth, also hamper
private consumption. Private investment in civilian sectors without access to government-
subsidised loans is similarly aching under the impact of the needed tight monetary policy stance.
High-frequency indicators are pointing towards a Graph III.42.1: Russia - Real GDP growth and contributions
cooling of economic activity. Industrial production
10 pps. forecast
y-o-y growth and business confidence slumped in
8
the first months of 2025 to values last seen in
6
early 2023. In March, the Manufacturing PMI fell
4
to 48.2 points into contractionary territory and its
2
lowest value since April 2022. On the household
0
side, retail sales growth dropped to 2.2% y-o-y in
-2
February and March, its lowest value since March
-4
2023. Consumer confidence fell for its third
-6
consecutive quarter in Q1 2025. 17 18 19 20 21 22 23 24 25 26

Over the forecast horizon private consumption Net exports Investment Priv. consumption

and investment growth are projected to ease Gov. consumption Inventories Real GDP (y-o-y%)
substantially, with a slight uptick in 2026 as the
inflation and interest rate environment becomes more benign for both investors and consumers.
Public investment and subsidised private investment in war-related sectors are expected to buoy
aggregate investment and prevent it from contracting, despite the high interest rates. Government
consumption growth is set to decrease over the forecast horizon but outperform other GDP
components as it is carried by war-related spending. In the external sector, the deteriorating global
economic and foreign trade environment is expected to depress export and import growth.
Overall, GDP growth is projected to decelerate from 4.3% in 2024 to 1.7% in 2025 and further to
1.2% in 2026.

Persistently high inflation despite record interest rates

Despite a record high policy benchmark interest rate of 21% in place since October 2024, inflation
has been increasing over the past six months. Price pressures are fuelled by fiscal spending,
preferential lending schemes impeding the monetary transmission and a tight labour market
driving real wages up. In the first three months of 2025, annual inflation stood around 10%,
showing only weak signs of cooling. Over the course of 2025, inflation is forecast to gradually
decelerate, averaging 9.5% for the year as a whole, as the tight monetary policy precludes lending
in the civilian sector without access to preferential loans and reduces private demand. Real wage

179
 European Economic Forecast, Spring 2025

growth is expected to continue declining throughout the year. These trends are projected to
continue in 2026, pushing annual inflation down to 5.8%.

Dampened government revenues cause deficits to widen

The federal budget recorded a considerable deficit in the first quarter of 2025, standing at RUB 2.2
tn (1.1% of GDP). A sharp fall in oil prices in the wake of the US tariff announcement is set to exert
substantial pressure on the budget, adding to the impact of the Western sanctions regime on the
oil sector. Moreover, the projected deceleration in economic activity for 2025 is forecast to dent
government revenues, counteracting tax hikes that took effect this year (an increase in the
corporate income tax from 20% to 25% as well as the introduction of more progression steps and
an upward shift of the personal income tax). Government expenditure is forecast to increase
further as the 2025 budget plan includes a 25% jump in war-related spending. These
developments are projected to push the Russian budget deficit to 2% of GDP in 2025 compared to
1.7% of GDP recorded in 2024. In 2026, the deficit is expected to widen further to 2.7% of GDP.
Meanwhile, the Russian debt-to-GDP ratio is projected to slowly increase from 20.3% in 2024 to
20.8% in 2025 and 22.9% in 2026.

Risks for Russian growth prospects are manifold and tilted to the downside
Economic prospects for Russia exhibit an increasingly high level of uncertainty, with risks overall
tilted to the downside. An expansion of the sanctions regime and further deceleration of global
growth, with an associated deeper drop in oil prices, represent external downside risks to Russian
growth. Domestically, stickier-than-expected inflation would require tight monetary policy for
longer, which would additionally weigh on growth. An end to the war in Ukraine paired with
sanctions relief as well as subsiding global trade tensions could, on the other hand, bolster growth
prospects.

Table III.42.1: Main features of country forecast - RUSSIA

2024 Annual percentage change

bn RUB Curr. prices % GDP 05-20 2021 2022 2023 2024 2025 2026
GDP 201152.1 100.0 2.3 5.9 -1.4 4.1 4.3 1.7 1.2
Private Consumption 99307.6 49.4 3.8 9.8 -0.6 7.4 5.4 1.7 1.9
Public Consumption 37320.5 18.6 0.9 2.9 2.0 3.8 4.8 4.1 2.0
Gross fixed capital formation 44520.8 22.1 3.3 9.3 7.4 7.8 6.0 0.7 1.0
Exports (goods and services) 44085.7 21.9 2.7 3.2 -13.8 -11.0 3.0 0.5 0.0
Imports (goods and services) 35385.8 17.6 3.7 19.1 -14.3 13.0 0.0 1.0 2.0
GNI (GDP deflator) 198514.3 98.7 2.3 5.9 -1.1 4.9 4.3 1.7 1.2
Contribution to GDP growth: Domestic demand 2.9 7.5 1.5 6.2 5.0 1.8 1.5
Inventories -0.1 1.5 -1.1 3.0 -0.8 0.0 0.0
Net exports -0.2 -3.1 -1.2 -5.0 0.7 -0.1 -0.3
Employment 0.3 1.3 0.4 -0.1 0.5 0.1 0.1
Unemployment rate (a) 6.1 4.8 3.9 3.2 2.5 2.7 3.2
Compensation of employees / head : : : : : : :
Unit labour costs whole economy : : : : : : :
Saving rate of households (b) : : : : : : :
GDP deflator 9.2 18.2 18.2 8.0 9.3 8.7 5.3
Consumer price index 8.0 6.7 13.7 5.9 8.4 9.5 5.8
Terms of trade goods : 36.6 29.5 -16.6 -0.1 -4.4 -1.5
Trade balance (goods) (c) 9.6 10.5 13.6 5.9 6.1 4.8 4.1
Current-account balance (c) 4.6 6.8 10.4 2.4 2.9 1.6 0.9
General government balance (c) 1.4 0.8 -1.6 -2.5 -1.7 -2.0 -2.7
Structural budget balance (d) : : : : : : :
General government gross debt (c) 12.5 16.5 18.5 19.5 20.3 20.8 22.9
(a) as % of total labour force. (b) gross saving divided by adjusted gross disposable income. (c) as a % of GDP. (d) as a % of potential GDP.

180
43. INDIA

India’s economy continues to expand at a robust pace of around 6.5%, the highest among the
larger emerging market economies. Fiscal policy remains broadly growth-supportive through
targeted capital spending, while gradual fiscal consolidation continues. Monetary policy has
begun to cautiously ease amid moderating inflation and stable credit conditions. However,
growth is expected to remain below pre-pandemic levels, constrained by still high real interest
rates and subdued external demand amid persistent global uncertainty. Escalating trade
tensions pose a significant downside risk but could also offer opportunities over the medium
term. Domestic vulnerabilities remain linked to weather-related shocks and commodity price
volatility.

Strong domestic fundamentals sustain robust growth

India’s economy continues to expand at a strong Graph III.43.1: India - Real GDP growth and contributions
pace. Real GDP is estimated to have grown by 15 pps.
6.5% in fiscal year (FY)2024-25, driven by forecast
12
resilient domestic demand and solid
macroeconomic fundamentals. Although slightly 9

below pre-pandemic trends, this performance 6

confirms India’s status as the fastest-growing 3

major economy, benefitting from a large and 0
youthful labour force, a growing domestic market,
-3
competitive wage costs, and a stable democratic
framework. Growth is projected to remain robust -6
17 18 19 20 21 22 23 24 25 26
at 6.4% in both FY2025-26 and FY2026-27, Net exports Investment Priv. consumption
driven by strong consumption and investment, Gov. consumption Inventories Real GDP (y-o-y%)
amid easing inflation and policy support.
Domestic demand remains the key growth engine. In FY2024-25, household spending was buoyed
by income growth in both rural and urban areas. A favourable monsoon boosted agricultural output
and rural incomes, while tax relief and improving labour market conditions supported urban
demand. Public spending also picked up following the 2024 general elections. Although elevated
interest rates continue to dampen purchases of durable goods and housing, private consumption
growth is expected to remain solid, backed by rising real incomes. Investment growth is expected
to pick, led by government infrastructure projects. Private investment is set to benefit from strong
corporate balance sheets, low non-performing loan levels, and ongoing production-linked incentive
schemes. Nevertheless, high real interest rates and subdued global demand continue to weigh on
private capex and business confidence. Net exports are expected to weigh on growth over the
forecast period as imports outpace exports in line with strong domestic demand.
Inflation has moderated and entered the Reserve Bank of India’s target range of 4%. Headline
consumer price inflation eased to 4.9% in 2024, down from 5.7% the year before. The decline
reflected lower food and fuel prices, strong harvests, and easing supply bottlenecks. Inflation
excluding energy and food, though still elevated, is gradually declining. Consumer price inflation is
projected to average 4.3% 2025 and 4.4% in 2026, close to the central bank’s 4% target midpoint.
Inflation expectations are well-anchored, and reduced food price volatility has helped contain
upside risks. Absent major oil price shocks and assuming normal monsoon patterns, price pressures
are expected to remain manageable.

Policy support balances growth and stability

Fiscal consolidation is progressing steadily. The general government deficit is estimated at 7.5% of
GDP in FY2024-25, narrowing to around 7% in FY2025-26 and FY2026-27. Strong revenue
growth, driven by improved compliance and digitalisation, along with lower subsidy spending due
to falling commodity prices, is contributing to fiscal improvement. Public debt is projected to come

181
 European Economic Forecast, Spring 2025

down to around 80% of GDP over the forecast horizon, from 81.5% in FY24-25. The government
has reiterated its medium-term goal of reducing central government debt to 50% of GDP by 2030.
In the near term, fiscal policy remains supportive of growth through targeted capital spending.
Monetary policy has begun to ease. In its first reduction since the pandemic, the central bank cut
its policy repo rate by 25 basis points in February and April 2025, to 6.0%. Liquidity conditions are
comfortable, and private sector credit growth remains healthy. The monetary stance is expected to
remain mildly accommodative to support the recovery while maintaining price stability.

External stability holds, but global risks loom

External imbalances remain manageable. Despite strong domestic demand, the current account
deficit (CAD) held steady at about 0.8% of GDP in FY2024-25. Robust services exports —
particularly in IT and business services— have offset a wider trade deficit, partly driven by higher
gold and capital goods imports. The current account deficit is expected to remain around 1% of
GDP, supported by strengthening export performance and moderating nominal import growth.
Foreign exchange reserves remain ample, covering over eight months of imports, and external debt
is moderate. The rupee has depreciated gradually, with the central bank intervening only to smooth
excessive volatility.
Risks to the outlook are tilted to the downside. The recent escalation in US tariffs poses a
significant risk to India’s exports in the short term. However, India’s comparative advantages
position it well to attract investment and expand exports amid shifting global supply chains driven
by the US-China trade war. Domestically, an uneven recovery in consumption or investment could
soften momentum. Climate-related risks, such as a weak monsoon, could weigh on rural incomes
and drive food inflation. Higher global oil prices could strain the external and fiscal accounts. On
the upside, faster progress in structural reforms, a more favourable investment climate, and
accelerated supply chain diversification could lift India’s medium-term growth potential.

Table III.43.1: Main features of country forecast - INDIA

2023 Annual percentage change

bn INR Curr. prices % GDP 12-20 2021 2022 2023 2024 2025 2026
GDP 301229.6 100.0 5.2 9.7 7.6 9.2 6.5 6.4 6.4
Private consumption 181304.3 60.2 5.4 11.7 7.5 5.6 7.3 6.8 6.5
Public consumption 31043.0 10.3 4.9 0.0 4.3 8.1 3.8 5.2 5.0
Gross fixed capital formation 91652.2 30.4 4.1 17.5 8.4 8.8 6.2 7.0 7.2
Exports (goods and services) 64609.8 21.4 2.4 29.6 10.3 2.2 4.9 5.4 6.0
Imports (goods and services) 70921.9 23.5 1.1 22.1 8.9 13.8 5.9 6.6 6.4
GNI (GDP deflator) 297107.9 98.6 9.6 9.9 7.4 9.2 6.5 6.4 6.4
Contribution to GDP growth: Domestic demand 4.9 11.9 7.5 7.0 6.7 6.8 6.6
Inventories 0.0 -3.5 0.0 5.4 0.1 0.0 0.0
Net exports 0.3 1.3 0.1 -3.2 -0.3 -0.4 -0.2
Employment 0.8 2.0 2.6 0.8 1.8 1.8 1.9
Unemployment rate (a) - 6.5 5.9 4.9 5.1 5.1 5.1
Compensation of employees/head - - - - - - -
Unit labour costs whole economy - - - - - - -
Saving rate of households - - - - - - -
GDP deflator 4.2 8.4 5.9 2.6 3.1 4.0 4.1
Consumer price index (c) 5.9 5.1 6.7 5.7 4.9 4.3 4.4
Terms of trade goods (b) 1.0 -14.3 -3.9 17.0 -0.7 1.9 1.9
Trade balance (goods) (b) -3.6 -6.0 -7.9 -6.6 -6.9 -6.7 -6.3
Current-account balance (b) -1.2 -1.3 -1.9 -0.6 -0.8 -0.9 -1.0
General government balance (b) -7.7 -9.4 -9.0 -7.9 -7.5 -7.1 -6.9
Structural budget balance - - - - - - -
General government gross debt (b) 71.6 83.5 82.2 81.2 81.5 80.8 79.9
(a) as % of total labour force. (b) as a percentage of GDP. (c) national indicator. National accounts, Balance of Payments, and Government Finance variables are
reported in fiscal years (April to March).

182
ACKNOWLEDGEMENTS

This report was prepared in the Directorate-General for Economic and Financial Affairs under the
direction of Maarten Verwey – Director-General and Reinhard Felke – Director “Policy coordination,
economic forecasts and communication”.

Executive responsibilities were attached to Laura Bardone – Head of Unit “Economic situation,
forecasts, business and consumer surveys”, Kristian Orsini – Deputy Head of Unit “Economic
situation, forecasts, business and consumer surveys”. Reuben Borg and Alexandru Zeana ensured
the coordination of the forecast process.

Part I “Economic outlook for the euro area and the EU” benefited from contributions by Christos
Axioglou, Reuben Borg, Lucian Briciu, Christian Buelens, Alessandra Cepparulo, Aron Kiss, Anna
Chiara Küffel, Gábor Márk Pellényi, Vito Ernesto Reitano, Andras Rezessy, Farzaneh Shamsfakhr,
Rupert Willis, Przemysław Woźniak, Tomasz Zdrodowski and Alexandru Zeana. In Part II “Special
issues”, Special Issue 1 “The macroeconomic impact of US tariffs" was prepared by Gergő
Motyovszki, Philipp Pfeiffer; Special Issue 2 “Business adjustment to tensions in foreign markets
and drivers of consumers’ views on the economy: Survey evidence" was prepared by Roberta Friz,
Irene Gkiouleka, Staffan Lindén, Fiona Morice; and Special Issue 3 “The economic impact of higher
defence spending” was prepared by Alessandra Cepparulo, Olga Croitorov, Luigi Giamboni, Kristian
Orsini, Gábor Márk Pellényi, Philipp Pfeiffer, Vito Ernesto Reitano. Box I.3.1. “Signals of a turnaround
in the housing market” was prepared by Vitor Martins, Bořek Vašíček, and Alexandru Zeana. Box
I.4.1. “Estimating the growth potential of Germany’s recent reform of its national fiscal framework”
was prepared by Francesca Crucitti, Felix Lödl, Philipp Pfeiffer, Leonard Salzmann. Box I.4.2. “The
impact of interest rate changes on euro area households' net interest income” was prepared by
Lucian Briciu, Anneleen Vandeplas and Alexandru Zeana. Box I.7.1. “What do different data sources
reveal about the EU’s export performance?” was prepared by Gábor Márk Pellényi. Box II.1.1: “EU-
US trade relationship through the lens of global value chains” was prepared by Alba Catalan Piera,
Pablo Piñero-Mira, Jose Manuel Ruede Cantuche (JRC) and Przemysław Woźniak.

Part III on “Member States” was prepared under the supervision of Isabel Grilo, Luc Tholoniat and
Javier Yaniz Igal (acting), Directors for the “Economies of the Member States”. These sections
benefited from contributions by Ronald Albers, Lucian Albulescu, Aurelija Anciūtė, Judit Antal,
Martin Åström, Luca Barbieri, Paolo Battaglia, Barbara Bernardi, François Blondeau, Paul Brans,
Francisco de Castro Fernández, Polona Cigoj, Eglė Čeponytė, Alessandro Cisotta, Fanny Dellinger,
Marika Demkowicz, Živilė Didžiokaitė, László Dózsa, Miriam Franzelin, Carmine Gabriele, Sotirios
Giannoulis, Oscar Gómez Lacalle, Leyre Gómez-Oliveros Duran, Peter Harvan, Martijn Hoogeland,
Zuzanna Iskierka, Dirk Kamps, Leena Kerkelä, Szabolcs Klubuk, Daniel Kosicki, Mitja Košmrl,
Radoslav Krastev, Jens Larsen, Anna Laudwein, François Le Helloco, Felix Lödl, Ivan Lozev, Simone
Macchi, Nikolas Mayer, Giulia Maravalli, Ján Mutkovič, Natalie Lubenets, Ardi Priks, Ruslan Lukach,
Mihai Macovei, Janis Malzubris, Dorin Mantescu, Robert Markiewicz, Tiago Pereira, Benedetta
Martinelli, Jakub Mazur, Clíona McDonnell, Fabrizio Melcarne, Laurent Moulin, Thomas Ouin-
Lagarde, Balázs Pálvölgyi, Mona Papadakou, Angeliki Paritsi, Martin Pažický, Sabine Prevost,
Paulina Rogowska, Marija Roguljić, Leonard Salzmann, Matilde Santini, Johannes Schuffels, Ana
Seco Justo, Suada Sela, Roberto Sigismondo, Michael Sket, Peeter Soidla, Gints Trupovnieks,
Susanna Ulinski, Daniel Vâlcu, Milda Valentinaitė, Vasiliki Vasilopoulou, Michael Vedsø, Alberto
Vidan Bermudez, Martina von Terzi, Goran Vukšić, Kai-Young Weißschädel, Kristina Xuereb, Christos
Zavos and Pieterjan van der Zwan.
The sections on “Candidate Countries” and “Other non-EU countries” were prepared under the
supervision of Annika Eriksgaard, Director of the “International economic and financial relations,
global governance”. These sections, and forecasts for all other non-EU economies, benefited from
contributions by Annika Beermann, Piotr Bogumił, Bernhard Böhm, Samir Chouman, Hugo
Ferradans Ramonde, Norbert Gaál, Ignacio García Aguilar, Dalia Grigonytė, Renata Hrůzová, Plamen

183
 Kaloyanchev, Lisa Klinger, Ivan Kušen, Milan Lisicky, Vincent Löwe, Andreea Maerean, Maria
Maierean, Alexandros Mouzakitis, Moisés Orellana, Stéphanie Pamies, José Ramón Perea, Jerzy
Pieńkowski, Rafał Raciborski, Uwe Stamm, Barbara Stearns-Bläsing, Vladimír Solanič, András Tari
and Rupert Willis.

Support in editing the report by Lorenzo Rosati, and for its communication and publication by
Lorenzo Rosati, Nicolas Carpentiers, Manuel De La Red Carino, Robert Gangl, Olivier Glorieux,
Tamás Nagy, Sarka Novotna, Yasmina Quertinmont and Susanne Krenzer under the responsibility
of Matthieu Hebert and Iciar Rodriguez Miranda, is gratefully acknowledged.

Follow-up calculations were performed by Pedro Arevalo, Francesca D’Auria, Olga Croitorov,
Francesca Crucitti, Anna Monisso and Kieran Mc Morrow under the responsibility of Björn Döhring.
Forecast assumptions were prepared by Paloma Cortés, Grzegorz Janowicz and Jannik Sielmann.
Statistical support for the production of the forecast was provided by Anna Chiara Küffel, Ingo
Kuhnert, Simone Russo, Jurgen Van Geijstelen, Cédric Viguie and Tomasz Zdrodowski. Further
statistical and layout assistance was provided by Szabolcs Klubuk, Johann Korner, Gianluca Papa,
Jacek Szelożyński and Christos Zavos.
Valuable comments and suggestions by Gerrit Bethuyne, Stefan Ciobanu, Angela D’Elia, Björn
Döhring, María José Doval Tedin, Patrick D’Souza, Miroslav Florian, Christian Gayer, Joern Griesse,
Valeska Gronert, Martin Hallet, Renata Hrůzová, Aron Kiss, Zenon Kontolemis, Bettina Kromen,
Stefan Kuhnert, Paul Kutos, Júlia Lendvai, Milan Lisicky, Maarten Masselink, Gilles Mourre, Moisés
Orellana, Dino Pinelli, Eric Ruscher, Matteo Salto, Marie-Luise Schmitz, Dominique Simonis, Uwe
Stamm, Andras Tari, Lotte Taylor, Michael Thiel, Roberta Torre, Alessandro Turrini, Anneleen
Vandeplas, Valerie Vandermeulen, Charlotte Van Hooydonk, Florian Wöhlbier, Norbert Wunner and
Javier Yaniz Igal are gratefully acknowledged.
Secretarial support for the finalisation of this report was provided by Maria Symeonidou.

Comments on the report would be gratefully received and should be sent to:
Directorate-General for Economic and Financial Affairs
Unit A3: Economic situation, forecasts, business and consumer surveys
European Commission
B-1049 Brussels
E-mail: ecfin-forecasts@ec.europa.eu

184
Statistical Annex
European Economic Forecast – Spring 2025
Contents

Output : GDP and its components

1. Gross domestic product 188
2. Profiles (q-o-q) of quarterly GDP 188
3. Profiles (y-o-y) of quarterly GDP 189
4. GDP per capita 189
5. Final domestic demand 190
6. Final demand 190
7. Private consumption expenditure 191
8. Government consumption expenditure 191
9. Total investment 192
10. Investment in construction 192
11. Investment in equipment 193
12. Public investment 193
13. Potential GDP 194
14. Output gap relative to potential GDP 194

Prices
15. Deflator of GDP 195
16. Deflator of private consumption 195
17. a) Harmonised consumer prices index 196
17. b) All-items HICP, excluding energy, food, alcohol and tobacco 196
18. Harmonised consumer prices quarterly profiles 197
19. Deflator of exports of goods 197
20. Deflator of imports of goods 198
21. Terms of trade of goods 198

Wages, population and labour market

22. Total population 199
23. Total employment in persons 199
24. Unemployment rate 200
25. Compensation of employees per head 200
26. Real compensation of employees per head 201
27. Labour productivity 201
28. Unit labour costs, whole economy 202
29. Real unit labour costs 202

Exchange rates
30. Nominal bilateral exchange rates 203
31. Nominal effective exchange rates 203

General Government
32. Total expenditure 204
33. Total revenue 204

186
 Statistical Annex

34. Net lending (+) or net borrowing (-) 205

35. Interest expenditure 205
36. Primary balance 206
37. Cyclically-adjusted primary balance 206
38. Structural budget balance 207
39. Net expenditure growth 207
40. Gross debt 208

Saving
41. Gross national saving 208
42. Gross saving of the private sector 209
43. Saving rate of households 210
44. Gross saving of general government 210

Trade and international payments

45. Exports of goods and services 211
46. Imports of goods and services 211
47. Merchandise trade balance (% of GDP) 212
48. Current-account balance (% of GDP) 212
49. Net lending (+) or net borrowing (-) 213
50. Current-account balance (bn EUR) 213
51. Export markets (goods and services) 214
52. Export performance (goods and services) 214

World economy
53. World GDP 215
54. World exports of goods and services 216
55. Shares of main trading partners in goods export of EU and Member States 216
56. World imports of goods and services 217
57. Shares of main trading partners in goods import of EU and Member States 217
58. World merchandise trade balances (bn USD) 218
59. World current-account balances (bn USD) 219
60. Crude oil prices 219

187
European Economic Forecast, Spring 2025

Table 1: Gross domestic product, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.5 1.1 0.4 6.2 4.3 1.2 1.0 0.8 0.9 1.1 1.2 1.5
Germany 1.2 1.7 0.6 3.7 1.4 -0.3 -0.2 0.0 1.1 -0.1 0.7 1.3
Estonia -0.4 3.6 2.6 7.2 0.1 -3.0 -0.3 1.1 2.3 -1.0 1.1 2.6
Ireland 0.4 7.1 6.2 16.3 8.6 -5.5 1.2 3.4 2.5 -0.5 4.0 3.6
Greece -0.1 -4.1 -0.8 8.7 5.7 2.3 2.3 2.3 2.2 2.1 2.3 2.2
Spain 0.9 0.1 -0.3 6.7 6.2 2.7 3.2 2.6 2.0 3.0 2.3 2.1
France 0.9 1.1 -0.2 6.9 2.6 0.9 1.2 0.6 1.3 1.1 0.8 1.4
Croatia 0.7 -0.2 0.8 12.6 7.3 3.3 3.9 3.2 2.9 3.6 3.3 2.9
Italy -0.3 -0.7 -1.0 8.9 4.8 0.7 0.7 0.7 0.9 0.7 1.0 1.2
Cyprus 2.7 -1.7 4.2 11.4 7.2 2.8 3.4 3.0 2.5 3.6 2.8 2.5
Latvia -0.5 3.6 1.5 6.9 1.8 2.9 -0.4 0.5 2.0 0.0 1.0 2.1
Lithuania 0.9 4.3 3.4 6.4 2.5 0.3 2.8 2.8 3.1 2.2 3.0 3.0
Luxembourg 2.8 2.1 2.0 6.9 -1.1 -0.7 1.0 1.7 2.0 1.2 2.3 2.2
Malta 3.3 5.7 4.9 13.3 4.3 6.8 6.0 4.1 4.0 5.0 4.3 4.3
Netherlands 1.4 0.9 1.1 6.3 5.0 0.1 1.0 1.3 1.2 0.8 1.6 1.5
Austria 1.3 1.1 0.4 4.8 5.3 -1.0 -1.2 -0.3 1.0 -0.6 1.0 1.4
Portugal 0.6 -0.9 0.5 5.6 7.0 2.6 1.9 1.8 2.2 1.7 1.9 2.1
Slovakia 5.1 2.5 1.7 5.7 0.4 2.2 2.1 1.5 1.4 2.2 2.3 2.5
Slovenia 1.8 0.4 2.3 8.4 2.7 2.1 1.6 2.0 2.4 1.4 2.5 2.6
Finland 0.9 0.0 1.2 2.7 0.8 -0.9 -0.1 1.0 1.3 -0.3 1.5 1.6
Euro area 0.8 0.8 0.3 6.3 3.5 0.4 0.9 0.9 1.4 0.8 1.3 1.6
Bulgaria 3.5 1.3 1.7 7.8 4.0 1.9 2.8 2.0 2.1 2.4 2.9 3.0
Czechia 2.4 1.6 1.7 4.0 2.8 -0.1 1.1 1.9 2.1 1.0 2.4 2.7
Denmark 0.2 1.2 1.6 7.4 1.5 2.5 3.7 3.6 2.0 2.4 2.5 1.8
Hungary -0.1 2.1 2.5 7.2 4.3 -0.8 0.5 0.8 2.5 0.6 1.8 3.1
Poland 4.6 3.1 3.4 6.9 5.3 0.2 2.9 3.3 3.0 3.0 3.6 3.1
Romania 2.8 2.8 3.4 5.5 4.0 2.4 0.8 1.4 2.2 1.4 2.5 2.9
Sweden 1.6 2.1 1.3 5.9 1.5 -0.1 1.0 1.1 1.9 0.3 1.8 2.6
EU 1.0 1.0 0.6 6.3 3.5 0.5 1.0 1.1 1.5 0.9 1.5 1.8
United Kingdom 0.4 2.0 -0.7 8.6 4.8 0.4 1.1 1.0 1.3 1.0 1.4 1.4
Japan 0.0 1.0 -0.3 2.7 0.9 1.5 0.1 0.7 0.6 0.2 1.2 1.0
United States 1.0 2.1 1.4 6.1 2.5 2.9 2.8 1.6 1.6 2.7 2.1 2.2

Incorrect slice name

Table 2: Profiles (qoq) of quarterly GDP, volume (percentage change from previous quarter, 2024-26) 30.04.2025

2024/1 2024/2 2024/3 2024/4 2025/1 2025/2 2025/3 2025/4 2026/1 2026/2 2026/3 2026/4
Belgium 0.4 0.3 0.3 0.2 0.4 0.2 -0.1 0.1 0.3 0.3 0.4 0.4
Germany 0.2 -0.3 0.1 -0.2 0.2 0.0 0.0 0.1 0.2 0.3 0.3 0.3
Estonia 0.0 0.2 0.2 0.7 0.1 0.2 -0.1 0.0 0.7 0.9 1.0 1.1
Ireland 1.6 -0.4 4.1 3.6 3.2 : : : : : : :
Greece 0.1 1.2 0.4 0.9 : : : : : : : :
Spain 1.0 0.8 0.7 0.7 0.6 0.5 0.6 0.5 0.5 0.5 0.5 0.5
France 0.1 0.3 0.4 -0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.5 0.5
Croatia 0.7 1.2 0.4 1.5 0.6 0.7 0.7 0.7 0.7 0.7 0.7 0.7
Italy 0.3 0.1 0.0 0.1 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Cyprus 1.8 0.0 0.8 0.3 : : : : : : : :
Latvia -0.2 0.0 -0.2 0.0 0.1 0.3 0.4 0.4 0.6 0.6 0.5 0.4
Lithuania 1.3 0.4 1.2 1.0 0.6 0.3 0.7 0.7 0.8 0.8 0.9 0.9
Luxembourg 0.6 0.7 -0.9 1.4 0.9 -0.3 0.2 0.4 0.4 0.7 1.0 1.1
Malta 1.3 2.8 -0.6 -0.7 : : : : : : : :
Netherlands -0.2 1.0 0.8 0.4 0.1 0.2 0.2 0.3 0.3 0.3 0.3 0.4
Austria 0.0 -0.4 -0.2 -0.4 0.2 0.0 0.0 0.0 0.3 0.4 0.4 0.4
Portugal 0.6 0.4 0.4 1.5 -0.5 0.4 0.6 0.6 0.6 0.6 0.6 0.6
Slovakia 0.6 0.3 0.3 0.5 0.2 0.5 0.5 0.5 0.2 0.3 0.4 0.4
Slovenia 0.0 0.1 0.4 0.6 0.5 0.5 0.5 0.5 0.7 0.7 0.7 0.7
Finland 0.5 0.1 0.6 0.0 0.1 0.2 0.3 0.4 0.3 0.4 0.4 0.4
Euro area 0.3 0.2 0.4 0.2 0.4 0.0 0.1 0.3 0.4 0.4 0.4 0.4
Bulgaria 0.8 0.8 0.8 0.9 0.5 0.1 0.1 0.2 0.6 0.8 0.8 1.0
Czechia 0.3 0.2 0.6 0.7 0.5 0.4 0.4 0.4 0.5 0.6 0.6 0.7
Denmark -0.1 1.4 1.2 1.8 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Hungary 0.4 -0.2 -0.7 0.6 -0.2 0.6 0.6 0.6 0.6 0.6 0.6 0.6
Poland 0.8 1.5 0.1 1.4 : : : : : : : :
Romania -0.4 0.4 -0.1 0.6 : : : : : : : :
Sweden 1.1 0.0 0.5 0.6 0.0 0.1 0.3 0.4 0.6 0.6 0.6 0.6
EU 0.3 0.3 0.4 0.4 0.3 0.1 0.1 0.3 0.4 0.4 0.5 0.5
United Kingdom 0.9 0.5 0.0 0.1 0.2 0.4 0.4 0.4 0.3 0.3 0.3 0.3
Japan -0.5 0.8 0.4 0.6 0.1 -0.1 -0.1 -0.1 0.3 0.3 0.3 0.3
United States 0.4 0.7 0.8 0.6 -0.1 0.5 0.3 0.2 0.4 0.5 0.5 0.5
Note: See note 10 for aggregation details for the EU and EA aggregates.

188
 Statistical Annex

Incorrect slice name

Table 3: Profile (yoy) of quarterly GDP, volume (percentage change from corresponding quarter in previous year, 2024-26) 30.04.2025

2024/1 2024/2 2024/3 2024/4 2025/1 2025/2 2025/3 2025/4 2026/1 2026/2 2026/3 2026/4
Belgium 0.8 1.0 1.2 1.1 1.1 0.9 0.6 0.5 0.4 0.5 1.1 1.4
Germany -0.1 -0.2 -0.3 -0.2 -0.2 0.1 0.0 0.3 0.3 0.6 1.0 1.2
Estonia -1.0 -0.7 -0.2 1.1 1.2 1.2 0.9 0.3 0.9 1.6 2.7 3.8
Ireland -3.8 -3.1 3.0 9.2 10.9 : : : : : : :
Greece 2.1 2.1 2.3 2.6 : : : : : : : :
Spain 2.7 3.3 3.3 3.3 2.8 2.6 2.5 2.3 2.2 2.1 2.0 1.9
France 1.4 1.0 1.3 0.8 0.8 0.7 0.4 0.8 1.0 1.2 1.5 1.7
Croatia 4.4 3.3 4.2 3.8 3.7 3.2 3.4 2.6 2.8 2.9 2.9 3.0
Italy 0.3 0.6 0.6 0.6 0.6 0.7 0.9 1.0 0.9 0.8 0.8 0.7
Cyprus 3.9 3.4 3.6 2.9 : : : : : : : :
Latvia -0.3 0.0 -0.9 -0.4 -0.1 0.2 0.8 1.1 1.7 2.0 2.1 2.1
Lithuania 2.8 1.6 2.6 3.9 3.2 3.1 2.6 2.3 2.5 3.0 3.2 3.4
Luxembourg 0.5 1.6 0.0 1.9 2.2 1.2 2.2 1.2 0.6 1.6 2.4 3.2
Malta 8.4 8.0 5.0 2.8 : : : : : : : :
Netherlands -0.6 0.6 1.9 2.1 2.4 1.6 1.0 0.9 1.1 1.2 1.3 1.4
Austria -1.7 -1.7 -1.1 -0.9 -0.7 -0.4 -0.2 0.1 0.2 0.7 1.2 1.7
Portugal 1.4 1.5 2.0 2.9 1.8 1.9 2.1 1.1 2.2 2.3 2.3 2.3
Slovakia 2.9 2.1 1.7 1.6 1.2 1.4 1.6 1.6 1.6 1.4 1.3 1.2
Slovenia 2.0 0.9 1.3 1.1 1.6 1.9 2.0 1.9 2.1 2.3 2.5 2.8
Finland -1.3 -1.2 0.8 1.2 0.7 0.8 0.5 0.9 1.2 1.5 1.6 1.6
Euro area 0.5 0.5 1.0 1.2 1.2 1.1 0.7 0.7 0.8 1.1 1.5 1.7
Bulgaria 2.0 2.4 2.8 3.4 3.0 2.3 1.6 0.8 1.0 1.7 2.4 3.3
Czechia 0.4 0.4 1.4 1.8 2.0 2.2 2.0 1.7 1.8 1.9 2.1 2.4
Denmark 2.5 4.1 3.7 4.4 5.0 4.1 3.3 1.9 2.0 2.0 2.0 2.0
Hungary 1.6 1.2 -0.8 0.1 -0.4 0.4 1.7 1.7 2.5 2.5 2.5 2.5
Poland 1.7 3.9 2.1 3.8 : : : : : : : :
Romania 1.9 0.9 0.1 0.5 : : : : : : : :
Sweden 0.0 0.6 0.9 2.2 1.1 1.2 1.1 0.9 1.5 1.9 2.1 2.2
EU 0.6 0.8 1.1 1.4 1.4 1.3 1.0 0.9 1.0 1.3 1.6 1.8
United Kingdom 0.7 1.1 1.2 1.5 0.8 0.7 1.1 1.5 1.5 1.4 1.3 1.1
Japan -0.8 -0.7 0.7 1.2 1.8 0.9 0.4 -0.2 0.0 0.4 0.7 1.1
United States 2.9 3.0 2.7 2.5 2.0 1.8 1.4 1.0 1.5 1.5 1.6 1.9
Note: See note 10 for aggregation details for the EU and EA aggregates.

Table 4: Gross domestic product per capita (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.7 0.4 -0.1 5.8 3.4 0.3 0.4 0.4 0.5 0.7 0.9 1.2
Germany 1.5 1.3 0.2 3.6 0.6 -1.1 -0.5 -0.2 1.0 -0.4 0.5 1.2
Estonia 0.0 3.9 2.4 7.1 -0.1 -5.4 -0.9 1.3 2.5 -1.0 1.1 2.6
Ireland -1.4 6.5 4.7 14.9 6.4 -7.2 -0.5 2.2 1.4 -2.3 2.8 2.6
Greece -0.3 -3.6 -0.6 9.2 6.4 2.6 2.4 2.5 2.5 2.6 2.7 2.6
Spain -0.4 0.2 -0.7 6.7 5.2 1.4 2.2 1.7 1.3 1.8 1.4 1.3
France 0.4 0.6 -0.6 6.5 2.3 0.6 0.8 0.2 1.0 0.8 0.5 1.0
Croatia 0.8 0.3 2.1 13.4 7.4 2.7 4.0 3.3 2.9 3.5 3.4 3.0
Italy -0.9 -0.8 -0.8 9.5 5.0 0.8 0.8 0.8 1.0 0.7 1.2 1.5
Cyprus 0.4 -2.4 3.1 9.7 5.2 0.8 1.8 1.6 1.3 2.2 1.8 1.5
Latvia 0.8 4.9 2.3 7.9 1.7 3.1 0.7 1.2 2.8 1.0 1.7 2.9
Lithuania 2.3 5.6 4.1 6.5 1.7 -1.1 2.2 2.5 3.3 1.7 3.5 3.7
Luxembourg 1.0 -0.2 -0.1 5.3 -3.2 -2.5 -0.6 -0.1 0.3 -0.4 0.5 0.5
Malta 2.7 4.2 1.8 12.7 1.6 2.6 2.7 1.6 2.0 1.4 1.8 2.3
Netherlands 1.0 0.5 0.6 5.7 4.0 -0.9 0.3 0.8 0.8 0.3 1.0 1.0
Austria 1.0 0.4 -0.3 4.4 4.1 -1.8 -1.7 -0.5 0.7 -0.9 0.7 1.2
Portugal 0.5 -0.5 0.5 5.3 6.4 1.6 0.9 1.0 1.6 0.8 1.4 1.9
Slovakia 5.0 2.6 1.5 6.1 0.1 2.2 2.0 1.7 1.7 2.0 2.6 2.7
Slovenia 1.4 0.3 2.0 8.1 2.6 1.6 1.3 1.8 2.2 1.1 2.3 2.4
Finland 0.5 -0.5 1.0 2.5 0.5 -1.3 -0.8 0.6 1.1 -0.9 1.1 1.5
Euro area 0.4 0.6 0.1 6.3 3.0 -0.2 0.5 0.6 1.1 0.4 1.0 1.4
Bulgaria 4.0 2.9 3.1 8.5 4.7 2.2 3.0 2.4 2.7 2.9 3.2 3.6
Czechia 1.9 1.6 1.7 4.0 0.4 -1.1 1.0 1.7 1.9 0.7 2.2 2.5
Denmark -0.3 0.7 1.1 6.9 0.6 1.8 3.2 3.2 1.5 1.9 2.1 1.3
Hungary 0.0 2.5 2.8 7.7 4.6 -0.7 0.8 1.1 2.8 0.8 2.1 3.4
Poland 4.7 3.2 3.8 7.5 3.0 0.6 3.3 3.4 3.1 3.1 3.7 3.2
Romania 3.9 3.2 4.0 6.4 4.4 2.3 0.8 1.5 2.4 1.4 2.6 3.0
Sweden 0.9 1.2 0.2 5.3 0.4 -0.8 0.6 0.8 1.7 0.2 1.6 2.5
EU 0.7 0.9 0.4 6.4 2.8 -0.1 0.7 0.9 1.3 0.6 1.3 1.6
United Kingdom -0.3 1.2 -1.2 8.2 3.9 -0.9 0.0 0.3 0.6 0.3 0.7 0.7
Japan -0.1 1.2 -0.1 2.8 1.4 2.1 0.6 1.2 1.1 0.7 1.7 0.5
United States 0.1 1.3 0.8 5.8 1.9 2.0 1.9 0.8 0.8 1.9 1.3 1.4

189
European Economic Forecast, Spring 2025

Table 5: Domestic demand, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.7 1.3 0.4 4.6 4.3 1.4 0.9 1.4 1.0 1.0 1.4 1.5
Germany 1.0 1.3 1.1 3.0 2.8 -0.4 0.4 1.1 1.2 -0.6 0.8 1.4
Estonia -1.3 4.9 3.5 7.8 0.1 -1.5 -0.8 1.4 2.6 -1.2 0.8 2.6
Ireland -1.3 5.2 8.4 -16.4 8.0 6.0 -11.6 8.4 2.3 -8.5 9.1 2.3
Greece -0.3 -5.0 0.3 7.2 7.7 1.8 4.3 2.9 2.4 3.4 2.6 2.3
Spain 0.2 -0.9 0.1 7.0 3.9 1.7 2.9 2.8 2.2 2.5 2.3 2.2
France 1.2 1.1 0.1 6.0 2.8 0.3 0.3 0.7 1.3 -0.1 0.5 1.2
Croatia -0.2 -0.5 2.4 7.0 7.6 1.5 6.3 4.0 3.3 5.8 3.7 2.8
Italy -0.2 -1.5 -1.0 9.2 5.6 0.1 0.4 0.9 1.1 -0.5 1.2 1.2
Cyprus 4.1 -3.5 4.9 5.6 8.5 5.2 0.6 3.0 2.4 3.0 2.2 2.0
Latvia -2.3 3.5 2.2 10.7 1.1 4.6 -1.0 0.7 2.0 -1.0 1.1 2.2
Lithuania -0.2 4.2 1.5 7.2 2.3 -1.4 3.0 3.4 3.3 1.4 3.5 3.2
Luxembourg 2.6 2.8 1.6 10.0 0.2 1.1 -0.1 2.8 2.8 1.3 3.0 2.5
Malta 1.6 4.6 4.1 12.4 8.1 2.1 5.3 3.8 3.5 5.2 3.9 4.1
Netherlands 1.3 1.0 0.6 6.0 5.0 -1.1 0.9 1.8 1.4 0.6 1.6 1.8
Austria 1.0 0.9 0.3 7.0 3.7 -3.8 -1.5 -0.1 0.9 -0.9 0.9 1.2
Portugal 0.5 -2.2 1.2 5.8 4.7 1.7 2.6 2.9 2.8 2.0 2.3 2.5
Slovakia 3.6 1.3 1.5 6.5 1.7 -4.9 3.9 1.6 1.9 4.3 2.4 1.8
Slovenia 1.3 -1.0 2.3 10.3 4.5 -0.2 2.1 2.0 2.7 3.5 2.7 3.1
Finland 0.9 0.6 1.0 3.1 2.7 -4.0 -0.9 1.0 1.5 -1.0 1.6 1.5
Euro area 0.7 0.4 0.6 5.1 3.8 0.1 0.5 1.5 1.5 0.0 1.4 1.5
Bulgaria 2.6 0.9 2.9 7.2 5.8 -1.9 4.3 2.5 2.5 3.5 3.0 3.5
Czechia 1.9 1.1 1.6 7.3 3.3 -2.7 0.5 3.0 2.9 0.4 3.3 3.1
Denmark 0.2 1.5 1.9 7.7 -0.4 -2.9 0.4 2.4 2.0 0.3 2.9 1.6
Hungary -1.9 1.3 3.9 6.5 4.3 -5.4 -0.1 1.5 3.0 -0.6 2.8 3.5
Poland 5.0 2.5 3.0 8.6 4.8 -3.0 4.2 4.0 3.3 4.2 4.2 3.2
Romania 4.1 2.1 4.7 6.6 4.2 2.0 3.5 1.9 2.4 4.2 2.9 3.1
Sweden 2.2 2.4 1.0 6.0 2.8 -2.5 0.6 1.0 1.6 -0.5 1.7 2.4
EU 0.9 0.6 0.8 5.4 3.7 -0.3 0.7 1.6 1.6 0.3 1.6 1.8
United Kingdom 0.3 2.2 -0.9 9.3 5.0 0.0 2.4 1.5 1.4 1.5 1.3 1.4
Japan -0.5 1.3 -0.3 1.7 1.5 0.5 0.2 0.7 0.6 0.2 1.2 1.0
United States 0.5 2.2 1.6 7.1 2.7 2.3 3.1 1.6 1.4 3.0 2.2 2.2

Table 6: Final demand, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.9 1.9 1.1 9.1 5.0 -2.7 -1.1 0.0 1.4 -0.4 1.6 2.0
Germany 1.8 2.1 0.8 5.0 2.9 -0.4 -0.1 0.2 1.2 -0.4 1.0 1.8
Estonia 0.9 5.5 3.1 13.6 2.3 -5.0 -1.0 1.7 2.5 -0.8 1.7 2.8
Ireland 1.4 9.1 8.9 2.8 11.8 -2.3 4.0 3.3 2.6 4.0 3.4 3.3
Greece -0.1 -3.3 0.1 11.1 7.4 1.8 3.3 2.9 2.6 3.1 2.9 2.7
Spain 0.5 0.3 -0.3 8.5 6.6 2.0 3.0 2.7 2.2 2.8 2.5 2.3
France 1.2 1.7 -0.2 7.2 4.1 0.8 0.5 0.8 1.5 0.4 1.1 1.8
Croatia 0.0 0.8 1.5 14.1 13.9 -0.1 4.4 3.4 3.0 3.9 3.4 2.9
Italy -0.1 -0.6 -0.9 10.3 6.6 0.1 0.4 0.9 1.3 -0.3 1.5 1.6
Cyprus 3.3 -0.7 5.9 15.1 17.6 1.0 2.9 3.3 3.0 5.3 2.9 2.2
Latvia -0.3 4.5 2.4 10.1 5.1 0.7 -1.2 1.1 2.0 -1.3 1.3 2.2
Lithuania 1.7 5.2 3.8 11.3 6.9 -2.3 2.6 3.2 3.3 2.3 3.4 3.3
Luxembourg 3.4 4.2 2.9 11.0 1.2 0.0 0.2 3.0 3.1 1.1 3.8 3.4
Malta 4.2 7.1 7.5 4.5 11.4 4.2 5.3 3.6 3.2 4.0 3.5 3.4
Netherlands 1.9 2.9 1.5 6.4 4.7 -0.8 0.7 1.3 1.6 0.3 1.9 2.1
Austria 1.6 1.6 0.6 7.9 6.0 -2.5 -2.6 -0.4 1.3 -1.3 1.4 1.7
Portugal 1.1 -0.2 0.9 7.4 8.3 2.4 2.9 2.5 2.8 2.6 2.5 2.7
Slovakia 5.2 3.9 1.6 8.4 2.2 -2.9 2.2 1.7 1.8 3.2 3.1 2.8
Slovenia 2.5 1.3 2.9 12.2 5.5 -1.0 2.6 2.1 2.9 2.3 2.9 3.2
Finland 1.2 0.5 1.4 3.9 3.2 -2.7 -0.6 1.4 1.7 -0.7 2.1 1.9
Euro area 1.2 1.5 0.8 7.1 5.0 -0.2 0.7 1.1 1.6 0.5 1.6 2.0
Bulgaria 3.4 3.0 2.5 8.8 8.2 -1.1 2.3 2.2 2.4 2.3 3.0 3.3
Czechia 3.7 3.0 1.5 7.7 4.1 -0.4 1.0 2.2 2.7 0.7 2.9 3.0
Denmark 0.8 2.1 1.9 8.1 2.5 3.0 3.4 3.7 2.2 2.2 2.5 1.9
Hungary 2.3 3.1 3.4 7.3 7.1 -2.1 -1.4 0.9 2.9 -1.2 2.7 4.3
Poland 5.7 3.5 3.9 9.9 5.8 -0.4 3.4 3.2 3.0 3.0 3.6 3.1
Romania 5.5 3.9 4.8 8.2 5.6 1.2 1.7 1.8 2.5 2.5 2.7 3.0
Sweden 2.1 2.7 1.5 7.9 3.9 -0.3 1.2 1.3 1.7 0.3 1.8 2.6
EU 1.4 1.7 1.0 7.3 5.0 -0.2 0.9 1.3 1.8 0.7 1.8 2.2
United Kingdom 0.7 2.4 -0.7 8.0 6.7 -0.1 1.5 1.2 1.4 0.8 1.2 1.4
Japan -0.1 1.5 -0.3 3.0 2.1 0.9 0.3 0.9 0.7 0.2 1.5 1.2
United States 1.0 2.3 1.3 7.0 3.2 2.4 3.1 1.6 1.4 3.1 2.3 2.3

190
 Statistical Annex

Table 7: Private consumption expenditure, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.1 1.2 -0.2 5.6 3.6 0.6 2.0 1.5 1.1 0.9 1.3 1.4
Germany 0.5 1.1 0.0 2.3 5.6 -0.4 0.3 0.7 1.1 0.5 0.7 1.0
Estonia -0.1 4.5 2.9 7.1 2.9 -1.3 -0.3 1.4 2.4 -0.5 0.5 2.8
Ireland 1.5 0.6 0.8 8.9 10.8 4.2 2.3 2.4 2.3 3.0 2.8 2.6
Greece 0.2 -4.1 0.3 5.1 8.6 1.8 2.1 1.9 1.8 1.8 1.7 1.7
Spain 0.7 -0.8 -0.9 7.1 4.8 1.8 2.9 2.9 2.1 2.5 2.2 2.0
France 1.7 0.7 -0.2 5.3 3.2 0.8 1.0 1.0 1.4 0.8 0.7 1.2
Croatia -0.3 -1.0 1.7 10.7 6.9 3.0 5.6 3.8 3.4 5.5 3.6 2.9
Italy 0.2 -0.7 -1.7 5.8 5.3 0.4 0.4 1.2 1.1 0.0 1.0 1.2
Cyprus 3.9 -1.6 2.8 4.7 9.8 5.9 3.8 2.5 2.2 3.2 2.1 2.0
Latvia 0.5 3.2 1.0 8.1 5.1 -1.0 0.5 1.0 1.9 -0.2 1.1 2.4
Lithuania 0.2 3.8 2.0 8.1 2.0 -0.3 3.5 4.2 4.0 3.8 4.5 4.0
Luxembourg 2.9 2.2 0.7 11.4 6.6 2.0 1.3 2.0 2.4 2.0 2.6 2.4
Malta 1.6 3.0 2.6 11.8 11.1 12.2 5.7 4.1 3.9 4.5 4.3 4.0
Netherlands 0.1 0.4 0.1 4.5 6.9 0.8 1.2 1.9 1.8 0.4 1.6 1.8
Austria 1.3 0.5 -0.5 4.8 4.9 -0.5 0.1 0.3 1.0 0.1 1.0 1.2
Portugal 1.0 -1.3 0.6 4.9 5.6 1.9 3.2 3.3 2.8 2.5 2.1 2.2
Slovakia 4.5 0.6 3.4 3.0 5.1 -3.1 2.9 0.9 1.6 1.8 1.4 2.3
Slovenia 2.8 -0.5 1.8 10.5 5.3 0.1 1.6 2.2 2.3 1.3 2.7 2.5
Finland 1.7 0.9 0.1 3.2 0.9 0.0 -0.1 0.5 1.6 0.1 1.3 1.5
Euro area 0.8 0.2 -0.3 4.7 5.0 0.5 1.1 1.3 1.4 0.9 1.2 1.4
Bulgaria 4.2 1.2 2.7 8.5 3.9 1.4 4.2 3.5 2.5 4.4 3.4 3.3
Czechia 2.4 1.1 1.6 4.2 0.5 -2.8 2.2 3.3 3.0 1.6 2.4 3.2
Denmark 0.5 0.8 2.0 6.8 -2.1 1.4 0.9 1.6 1.7 0.7 1.4 1.8
Hungary -1.3 1.1 3.9 5.1 6.9 -1.0 5.1 3.4 3.2 3.9 3.6 3.9
Poland 4.8 2.1 2.9 6.2 5.2 -0.3 3.0 3.4 2.8 3.8 3.6 2.7
Romania 3.9 2.2 5.3 7.0 5.1 3.0 6.0 2.0 2.3 5.1 2.3 2.8
Sweden 2.4 2.4 0.9 6.0 2.8 -2.1 0.3 1.3 2.1 0.0 2.5 3.0
EU 1.0 0.4 0.0 4.9 4.7 0.4 1.3 1.5 1.6 1.2 1.4 1.6
United Kingdom 0.5 1.9 -1.1 7.2 7.4 0.5 0.6 1.0 1.4 0.6 0.9 1.4
Japan 0.4 0.6 -0.9 0.7 2.1 0.8 0.0 0.6 0.5 0.1 1.3 1.1
United States 1.2 2.1 1.4 8.8 3.0 2.5 2.8 2.0 1.3 2.7 2.1 2.0

Table 8: Government consumption expenditure, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.5 0.7 0.7 4.2 3.4 2.9 2.6 2.2 0.6 1.5 1.3 1.6
Germany 2.3 1.7 2.9 3.4 0.1 -0.1 3.5 1.9 1.3 2.0 1.4 1.0
Estonia 2.2 2.6 2.6 3.9 -1.5 0.9 0.3 1.2 2.5 1.2 0.4 0.2
Ireland 0.9 0.6 6.2 6.6 4.1 5.6 4.0 2.9 3.6 3.9 2.6 3.6
Greece 1.5 -3.5 0.2 1.8 0.1 2.6 -4.1 2.6 1.1 0.9 1.1 0.7
Spain 3.7 -0.9 1.9 3.6 0.6 5.2 4.1 2.3 1.6 3.4 1.6 1.5
France 1.7 1.4 0.1 6.6 2.6 0.7 2.1 1.0 1.1 2.1 0.1 0.9
Croatia 3.0 0.5 2.2 2.8 2.2 7.1 7.0 3.9 2.9 3.6 3.2 2.4
Italy 0.2 -1.3 0.3 2.3 0.8 0.6 1.1 0.9 0.9 -0.3 2.3 0.4
Cyprus 4.7 -2.3 5.4 8.9 4.7 1.2 1.5 3.7 2.5 0.1 1.5 2.1
Latvia -1.3 1.9 3.5 3.7 2.4 7.0 7.6 1.7 1.5 5.8 0.9 0.5
Lithuania 0.0 0.4 -0.3 1.2 1.2 -0.2 1.4 0.3 0.2 0.0 0.1 0.1
Luxembourg 2.4 2.7 4.1 4.8 4.0 1.5 4.9 4.4 2.6 4.3 2.8 2.3
Malta 2.8 5.7 8.5 6.0 0.1 3.1 7.3 4.7 4.2 8.3 2.2 5.3
Netherlands 4.0 -0.2 1.8 4.7 1.3 2.9 3.6 1.8 1.3 2.7 1.9 2.1
Austria 2.1 0.4 0.7 7.6 -0.6 1.2 1.6 -0.4 -0.4 0.4 0.5 0.2
Portugal 0.4 -1.9 0.8 3.8 1.7 0.6 1.1 1.2 1.2 1.5 1.3 1.7
Slovakia 4.7 1.2 1.4 3.7 -2.9 -2.5 3.7 0.9 0.8 3.8 0.4 -0.4
Slovenia 2.4 -0.6 2.3 6.2 -0.7 2.4 8.5 2.8 3.7 9.9 2.5 4.4
Finland 1.1 0.5 1.2 4.3 -0.6 3.4 0.7 -0.2 -0.1 0.4 -0.2 0.0
Euro area 1.9 0.5 1.5 4.4 1.1 1.4 2.7 1.6 1.2 1.9 1.2 1.1
Bulgaria 0.5 0.6 4.4 0.5 8.0 1.1 4.6 0.3 1.9 4.3 1.9 3.3
Czechia 1.2 -0.1 2.9 1.5 0.4 3.4 3.3 2.4 2.2 3.5 2.2 2.2
Denmark 2.3 0.9 0.1 4.9 -2.5 0.2 1.4 4.4 2.1 2.3 3.5 0.8
Hungary 0.2 1.8 2.2 2.0 3.2 3.3 -4.6 0.3 1.5 -0.8 0.4 1.9
Poland 3.8 1.3 3.9 5.0 0.6 4.5 8.2 2.8 3.2 7.8 3.1 2.7
Romania -0.1 1.5 3.7 -0.6 -1.4 6.3 0.7 0.6 1.0 3.8 -0.6 0.9
Sweden 1.4 1.4 0.6 3.4 0.7 1.4 1.2 1.3 0.4 0.7 0.7 0.4
EU 1.9 0.5 1.5 4.2 1.0 1.6 2.7 1.7 1.3 2.1 1.3 1.2
United Kingdom 1.4 1.1 -0.2 14.3 0.6 1.6 3.0 3.3 1.3 2.9 3.9 1.5
Japan 1.1 1.7 1.4 3.4 1.4 -0.3 0.9 1.0 0.8 0.5 0.8 0.7
United States 1.9 -1.1 2.0 0.4 -1.1 2.9 2.5 1.3 1.2 2.4 1.9 1.0

191
European Economic Forecast, Spring 2025

Table 9: Total investment, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.7 2.5 1.5 4.3 1.7 3.5 1.4 0.5 1.2 0.6 1.8 1.9
Germany 1.6 2.2 1.8 0.6 -0.2 -1.2 -2.7 0.2 2.6 -3.0 0.3 2.7
Estonia -6.3 7.7 10.6 0.3 -8.1 7.5 -6.9 1.6 3.1 -4.6 1.6 4.0
Ireland -7.7 15.6 17.1 -39.4 3.7 2.8 -25.4 22.4 1.4 -24.8 25.2 1.5
Greece -3.6 -11.6 1.2 21.7 16.4 6.6 4.5 7.8 7.3 7.4 8.9 7.1
Spain -3.4 -1.8 2.1 2.6 3.3 2.1 3.0 3.4 3.1 2.0 3.2 3.7
France 0.6 0.3 1.6 9.7 0.0 0.4 -1.3 -1.0 1.4 -1.9 0.0 2.0
Croatia -1.9 -0.7 3.2 4.8 10.4 10.1 9.9 4.3 3.2 9.1 4.5 3.0
Italy -2.0 -3.8 0.9 21.5 7.4 9.0 0.5 0.8 1.5 2.0 0.2 2.0
Cyprus 3.7 -11.4 14.2 1.9 10.8 10.7 0.1 3.5 3.0 4.9 3.2 1.8
Latvia -9.2 6.0 2.8 6.8 -1.6 9.9 -6.7 -1.2 2.6 -5.6 1.1 3.0
Lithuania -2.7 7.3 5.9 12.6 5.2 9.3 -1.3 3.5 4.0 -4.0 3.5 3.6
Luxembourg 2.4 3.7 1.8 14.6 -13.9 -6.4 -7.3 2.5 3.9 -2.9 4.2 3.0
Malta 3.4 9.0 2.0 22.2 9.8 -17.0 2.4 2.5 2.1 4.4 4.5 3.5
Netherlands 0.2 4.2 0.8 2.4 3.4 1.3 -0.5 0.8 1.5 -1.4 1.2 1.4
Austria -0.5 2.1 2.3 6.0 0.4 -3.2 -3.4 -0.7 1.9 -3.2 1.2 2.1
Portugal -1.2 -5.5 4.6 7.8 3.3 3.6 3.0 3.5 4.3 0.8 3.7 4.2
Slovakia 1.2 5.0 -2.3 5.1 4.3 4.0 1.8 3.6 3.8 0.7 6.1 2.5
Slovenia -2.4 -2.0 2.7 12.3 4.2 3.9 -3.7 0.7 2.8 -0.1 3.2 3.5
Finland 0.7 -0.9 3.2 1.8 1.5 -7.4 -7.1 3.5 3.0 -5.0 4.5 3.4
Euro area -0.6 0.4 2.4 3.7 2.0 1.6 -1.8 1.3 2.2 -1.9 1.8 2.5
Bulgaria 1.1 0.8 1.3 -8.3 6.5 10.2 -1.1 2.0 3.5 -1.5 3.0 4.5
Czechia 2.0 1.3 2.4 6.7 6.3 2.5 -1.2 0.6 3.2 0.8 2.9 3.5
Denmark -1.9 3.1 3.9 9.8 2.8 -6.6 2.7 2.4 2.5 -2.3 2.1 2.0
Hungary -2.6 4.4 5.5 5.7 0.7 -7.7 -11.1 -1.5 4.0 -10.1 3.4 3.9
Poland 6.7 5.3 2.3 1.5 1.7 12.7 -2.2 6.9 5.3 2.3 6.7 5.3
Romania 7.7 3.6 3.0 4.0 5.4 14.5 -3.3 2.3 3.6 5.4 6.7 7.4
Sweden 2.2 3.4 2.4 7.3 0.3 -1.5 -1.1 1.0 2.0 -2.5 1.3 3.7
EU -0.2 0.9 2.4 4.0 2.1 1.8 -1.8 1.5 2.4 -1.6 2.1 2.8
United Kingdom -0.9 3.8 0.0 7.6 5.1 0.3 1.5 0.6 1.5 0.4 0.3 1.4
Japan -3.4 2.7 0.0 0.5 -0.6 1.5 0.3 0.6 0.3 0.6 1.5 1.1
United States -2.7 4.8 2.6 5.4 2.0 3.2 4.3 1.4 1.7 4.3 2.4 3.9

Table 10: Investment in construction, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.4 1.7 1.2 2.8 -1.1 2.6 -0.8 0.8 1.2 -0.6 0.4 0.6
Germany 0.6 1.6 2.5 -3.1 -3.9 -3.4 -3.3 -0.1 1.8 -3.5 -0.9 2.2
Estonia -8.4 7.0 7.3 5.8 -0.5 6.4 -10.3 1.4 2.9 2.0 3.4 4.0
Ireland -14.7 2.0 5.0 3.7 2.9 -0.9 -1.9 2.0 2.1 -1.6 4.1 3.6
Greece -6.0 -16.8 -3.2 22.0 22.7 15.6 5.7 13.1 10.3 1.3 4.2 2.3
Spain -5.3 -5.1 3.3 0.5 2.2 3.0 3.5 2.7 3.6 2.6 2.9 3.5
France 0.0 -0.6 1.0 11.6 -2.6 -2.9 -2.0 -1.0 3.0 -2.4 0.5 5.0
Croatia -1.8 -3.0 0.6 3.8 5.4 13.1 14.2 5.4 2.2 10.6 4.4 3.6
Italy -3.2 -6.0 -0.2 32.5 9.2 15.5 2.0 0.5 1.9 3.5 -3.8 2.0
Cyprus 1.2 -14.6 16.1 17.0 4.2 5.0 3.7 3.7 3.4 5.5 2.9 2.0
Latvia -8.7 7.4 -0.2 -2.7 -3.0 19.1 -5.0 2.1 2.7 -5.7 1.3 2.7
Lithuania -2.7 5.4 4.6 2.5 8.8 11.2 1.8 2.0 2.9 0.0 3.3 2.9
Luxembourg 2.2 2.3 1.9 10.4 -8.1 -7.7 -9.4 3.1 3.4 -3.5 2.8 3.0
Malta -2.1 7.7 5.4 5.9 -25.8 -1.1 7.0 4.0 4.0 2.5 3.9 3.9
Netherlands -1.4 -0.8 5.9 3.0 1.6 -0.1 -3.4 3.1 1.3 -3.6 0.6 1.3
Austria -2.2 0.6 1.7 4.1 -1.3 -9.3 -5.4 1.0 2.2 -4.9 2.2 2.3
Portugal -3.4 -8.2 4.7 6.6 0.9 1.3 1.5 4.9 5.1 0.0 2.4 2.8
Slovakia 1.0 3.9 -1.6 3.7 4.6 8.3 -13.5 3.4 5.3 -5.0 5.7 4.8
Slovenia -3.6 -5.2 0.9 7.1 3.5 11.9 -5.3 1.5 2.2 -0.7 4.0 4.6
Finland 1.4 -1.0 3.0 -1.1 -0.5 -12.1 -8.9 2.4 2.9 -8.0 5.4 3.9
Euro area -1.9 -1.7 2.1 6.2 -0.1 0.7 -1.4 0.8 2.4 -1.3 0.1 2.9
Bulgaria 8.1 -4.4 -2.2 -12.5 10.7 2.5 -3.7 1.8 3.9 -3.1 3.5 3.6
Czechia 0.4 -0.8 2.5 2.6 1.1 1.9 -0.7 1.1 6.3 0.7 3.5 4.4
Denmark -5.6 4.2 4.5 10.2 -0.5 -4.5 0.3 2.7 2.1 -2.2 2.5 2.0
Hungary -5.3 2.0 5.9 0.5 1.4 -10.3 -7.9 -0.6 4.1 -10.1 4.3 4.5
Poland 7.4 3.6 2.0 3.7 1.0 8.0 -9.2 0.9 5.5 -4.9 6.9 6.8
Romania 12.1 5.1 6.6 2.3 9.5 9.8 -4.6 3.7 4.1 6.3 8.1 8.8
Sweden 1.7 3.4 2.9 1.9 -0.4 -5.3 -1.1 5.1 1.8 -5.6 0.5 2.4
EU -1.5 -1.1 2.3 5.8 0.2 0.7 -1.9 1.1 2.7 -1.5 0.8 3.3
United Kingdom -3.2 3.7 -0.2 10.3 3.3 -4.5 2.5 1.2 1.6 0.8 -0.1 1.5
Japan -5.4 2.3 0.4 0.0 -2.2 1.3 -1.1 1.0 1.2 -0.4 1.6 1.2
United States -8.4 3.9 1.7 2.5 -4.6 0.9 5.4 1.1 1.5 5.0 1.4 4.1

192
 Statistical Annex

Table 11: Investment in equipment, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium -1.8 1.9 1.4 5.5 2.6 8.7 4.6 -1.0 1.1 0.8 3.6 3.8
Germany 1.9 2.7 0.3 3.5 4.5 -0.8 -5.5 -0.3 3.6 -6.2 0.9 3.7
Estonia -6.0 8.4 4.5 11.8 0.5 11.6 -7.4 4.2 3.3 -15.0 -1.2 4.5
Ireland -1.7 9.3 2.5 14.6 24.4 0.1 -7.2 0.5 0.6 0.7 1.2 1.5
Greece 0.0 -7.5 2.4 23.8 16.1 1.7 4.5 5.6 6.1 10.6 12.5 11.7
Spain -2.4 2.0 0.3 3.3 2.9 1.1 2.8 5.5 2.7 1.1 4.2 4.6
France 0.4 0.7 0.9 8.3 -1.4 3.4 -4.4 -4.4 -3.4 -5.8 -5.0 -6.5
Croatia -3.5 2.4 5.7 8.8 15.3 10.5 5.4 3.1 5.9 9.5 5.8 2.9
Italy -1.3 -2.9 1.5 17.4 3.7 2.4 -2.6 0.9 1.1 -1.1 6.4 2.6
Cyprus 8.9 : 13.9 -34.5 -11.6 100.9 -3.7 2.6 2.6 -1.5 3.1 1.0
Latvia -12.3 4.5 6.8 21.8 -2.1 1.4 -9.6 -5.4 2.2 -6.5 0.5 3.5
Lithuania -6.4 11.9 7.3 31.3 0.9 9.2 -6.5 6.9 6.3 -11.5 4.1 5.1
Luxembourg 1.9 6.6 -0.5 26.4 -27.0 -6.4 -3.5 1.9 4.5 -5.5 6.6 1.7
Malta 8.9 12.2 -8.9 64.4 60.6 -43.7 -11.8 : : : : :
Netherlands 1.3 3.5 2.2 1.5 7.0 3.0 3.2 -4.1 1.6 0.4 2.5 1.1
Austria -0.4 2.6 2.1 9.2 -0.2 4.4 -4.5 -3.5 2.9 -6.1 -2.6 0.0
Portugal 1.9 -2.5 3.7 13.3 7.4 9.0 6.1 1.6 3.9 1.7 7.0 7.3
Slovakia -0.9 8.2 -4.5 8.9 1.6 -1.1 23.6 4.3 2.6 9.6 6.9 0.3
Slovenia -3.7 2.1 3.9 21.9 5.2 -0.5 -3.3 -2.7 0.8 -0.9 2.4 3.4
Finland -1.8 3.0 3.9 6.0 3.9 -5.0 -10.1 8.7 3.2 0.0 3.2 2.8
Euro area 0.0 1.2 1.1 8.0 3.7 1.8 -2.4 -0.3 1.6 -2.9 1.8 1.8
Bulgaria -8.3 8.8 2.8 -3.6 2.3 16.3 1.5 4.4 3.0 -1.0 3.0 5.5
Czechia 4.1 2.8 -0.3 11.6 12.3 3.8 -3.0 0.5 -0.6 -0.1 1.3 3.0
Denmark -1.5 4.0 -0.2 14.9 -6.1 -9.7 6.9 10.4 4.0 -2.3 1.3 3.6
Hungary -0.8 6.7 6.5 9.1 2.1 -8.0 -18.2 -2.2 4.2 -10.5 2.5 3.3
Poland 5.2 7.9 1.6 -3.3 2.0 20.9 6.6 12.9 4.9 10.3 6.5 3.9
Romania 2.2 2.8 -3.6 6.6 -5.4 26.0 1.9 1.3 3.1 3.0 4.7 5.6
Sweden 2.9 4.0 0.9 7.6 -0.7 5.5 -1.7 -5.0 1.8 -2.8 1.1 5.7
EU 0.3 1.8 1.0 7.6 3.3 2.9 -2.0 0.5 1.9 -2.2 2.1 2.2
United Kingdom 0.1 5.1 -1.6 6.2 16.0 11.0 0.3 -2.6 1.3 0.1 -0.1 1.2
Japan -2.7 4.0 0.0 1.3 -0.6 0.9 0.7 2.7 1.0 0.7 1.6 1.0
United States 1.3 6.3 0.1 5.2 3.4 3.6 3.2 0.5 0.6 3.8 4.6 4.1

Table 12: Public investment (as a percentage of GDP, 2006-2026) 30.04.2025

5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.1 2.4 2.6 2.8 2.7 2.8 3.0 3.3 3.2 3.1 2.9 2.9
Germany 2.4 2.4 2.7 2.9 2.8 2.8 2.9 3.0 3.0 3.0 3.0 3.0
Estonia 5.7 5.4 5.3 5.8 5.4 6.6 6.1 7.2 7.1 7.3 8.1 8.5
Ireland 4.2 2.1 2.1 2.0 2.0 2.3 2.7 2.8 3.1 2.5 2.9 3.0
Greece 5.2 3.2 3.4 3.6 3.7 3.9 3.7 4.2 3.8 4.9 4.5 3.9
Spain 4.7 2.8 2.2 2.7 2.7 3.0 2.7 3.0 3.0 3.0 3.1 3.2
France 4.6 4.4 4.0 4.1 4.2 4.2 4.3 4.3 4.2 4.3 4.2 4.1
Croatia 5.2 3.7 3.8 4.8 4.0 5.6 5.1 5.4 5.2 5.7 5.9 5.8
Italy 3.2 2.5 2.3 2.8 2.6 3.2 3.5 3.8 3.9 3.5 3.8 3.7
Cyprus 4.0 3.0 3.1 2.7 2.4 3.2 3.0 3.2 3.2 2.9 2.9 2.7
Latvia 5.5 5.1 5.1 5.6 4.5 5.6 5.7 7.0 7.2 5.3 6.2 6.1
Lithuania 4.9 4.1 3.5 3.2 3.2 4.2 4.2 4.9 4.6 3.9 4.1 3.7
Luxembourg 4.0 3.8 4.1 4.1 4.3 4.7 4.5 4.7 4.6 4.7 4.9 4.7
Malta 3.0 3.3 3.0 3.7 3.2 3.6 3.3 3.8 3.9 4.1 3.8 3.8
Netherlands 4.1 3.8 3.4 3.4 3.2 3.1 3.2 3.2 3.3 3.1 3.1 3.2
Austria 3.2 3.0 3.1 3.6 3.5 3.7 3.9 3.9 4.0 3.7 3.8 3.8
Portugal 3.9 2.5 1.9 2.6 2.4 2.6 2.7 3.7 4.2 3.1 3.2 3.5
Slovakia 3.7 4.2 3.5 3.0 3.1 3.5 3.6 5.1 5.2 3.7 4.6 4.2
Slovenia 4.8 4.5 3.6 4.7 5.5 5.3 5.1 5.3 5.2 5.2 5.1 5.1
Finland 3.6 4.0 4.4 4.2 4.1 4.1 4.4 4.9 4.8 4.3 4.8 4.6
Euro area 3.6 3.1 2.9 3.2 3.1 3.3 3.4 3.5 3.6 3.5 3.5 3.5
Bulgaria 4.9 4.5 2.9 2.7 2.4 3.8 3.0 3.6 3.3 3.3 3.6 3.4
Czechia 5.1 4.3 3.9 4.6 4.5 4.9 4.7 4.9 4.6 4.7 4.9 4.6
Denmark 3.1 3.6 3.5 3.2 3.0 3.1 3.1 3.8 3.9 3.2 3.3 3.3
Hungary 3.9 4.6 5.2 6.2 5.3 5.1 4.2 4.2 4.2 4.4 4.8 5.0
Poland 4.7 4.9 4.1 4.1 3.8 5.1 4.9 5.1 5.2 5.0 5.0 5.2
Romania 5.8 4.8 3.3 4.1 4.4 5.4 5.7 6.1 6.5 5.7 6.1 6.6
Sweden 4.3 4.6 5.0 5.0 5.1 5.3 5.4 5.5 5.6 5.4 5.4 5.6
EU 3.7 3.3 3.1 3.4 3.3 3.5 3.6 3.8 3.8 3.7 3.8 3.8
United Kingdom 3.0 2.7 2.8 3.1 3.1 3.2 3.3 3.4 3.5 3.3 3.2 3.3
Japan 3.7 3.8 3.9 4.2 3.9 3.9 3.8 3.9 3.9 3.6 3.6 3.5
United States 4.0 3.5 3.4 3.3 3.2 3.4 3.5 3.5 3.5 3.5 3.5 3.4

193
European Economic Forecast, Spring 2025

Table 13: Potential GDP, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.7 1.1 1.5 1.6 1.9 2.0 1.7 1.4 1.3 1.7 1.6 1.4
Germany 1.1 1.5 1.2 0.6 0.6 0.7 0.5 0.3 0.3 0.6 0.5 0.5
Estonia 2.4 1.8 3.3 2.6 0.9 1.0 0.1 0.2 0.3 0.1 0.2 0.3
Ireland 1.5 5.2 8.5 4.4 4.2 3.6 2.6 2.8 2.5 2.6 2.9 2.7
Greece 1.3 -2.4 -1.0 -0.6 0.3 0.7 1.2 1.7 1.9 1.2 1.8 2.0
Spain 2.6 0.0 0.6 0.9 1.8 2.1 2.3 2.4 2.2 2.4 2.4 2.3
France 1.5 1.0 0.8 1.2 1.2 1.1 1.2 1.1 1.0 1.2 1.1 1.0
Croatia 1.7 0.1 1.8 3.4 3.6 4.2 4.3 4.0 3.6 4.2 3.6 3.3
Italy 0.3 -0.3 0.2 0.1 1.2 1.0 1.3 1.0 0.9 1.3 1.1 0.9
Cyprus 3.3 -0.3 3.7 4.6 4.3 4.2 3.9 3.6 3.1 4.0 3.6 3.2
Latvia 2.7 0.9 2.5 2.9 1.6 2.1 0.8 1.3 1.4 1.0 1.4 1.5
Lithuania 3.9 2.0 3.5 4.1 3.4 3.2 2.7 2.8 2.2 2.4 2.5 2.1
Luxembourg 2.8 2.2 2.4 2.2 1.6 1.5 1.1 1.2 1.3 1.9 1.9 1.9
Malta 3.1 5.1 7.1 4.6 6.0 6.0 5.3 4.6 4.5 5.4 4.7 4.6
Netherlands 1.5 0.8 1.8 2.0 2.1 2.1 1.9 1.6 1.5 1.9 1.7 1.5
Austria 1.4 1.0 1.2 1.1 1.0 1.1 0.3 0.2 0.4 0.7 0.7 0.8
Portugal 0.3 -0.6 1.5 2.0 2.3 2.5 2.4 2.2 2.0 2.3 2.1 1.9
Slovakia 4.9 2.7 2.1 1.6 1.4 2.3 2.8 2.1 2.0 2.3 2.3 2.2
Slovenia 2.9 0.9 1.8 2.5 2.4 2.8 2.3 2.3 2.3 2.5 2.5 2.5
Finland 1.3 0.2 1.0 0.7 1.0 0.7 0.6 0.5 0.5 0.5 0.7 0.5
Euro area 1.3 0.8 1.2 1.0 1.3 1.3 1.2 1.1 1.1 1.3 1.2 1.2
Bulgaria 3.8 1.4 2.4 2.7 2.4 2.7 3.3 2.9 2.5 3.2 2.8 2.4
Czechia 3.3 1.5 2.4 0.7 1.4 2.0 1.4 1.3 1.4 1.6 1.6 1.8
Denmark 1.4 1.0 2.1 2.7 2.9 2.7 2.5 2.3 2.1 2.1 1.9 1.7
Hungary 1.4 0.9 3.2 3.2 2.6 1.9 1.1 1.1 1.2 1.4 1.5 1.7
Poland 4.0 3.6 3.7 3.4 4.2 3.0 2.6 2.7 2.7 2.8 2.9 2.8
Romania 4.8 1.7 4.4 2.0 1.8 2.8 1.9 1.7 1.7 2.3 2.2 2.3
Sweden 2.1 1.7 2.1 1.9 1.7 1.4 1.3 1.3 1.4 1.2 1.4 1.4
EU 1.5 1.0 1.4 1.2 1.5 1.5 1.4 1.2 1.2 1.4 1.4 1.3
United Kingdom 1.5 1.2 1.3 1.0 1.3 1.4 1.4 1.4 1.4 1.4 1.4 1.4
Japan : : : : : :: : : : : : :
United States 1.7 1.6 2.3 2.2 2.2 2.4 2.5 2.4 2.3 2.6 2.6 2.5

Table 14: Output gap relative to potential GDP ¹ (deviation of actual output from potential output as % of potential GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.7 -0.6 -1.0 -1.0 1.2 0.4 -0.2 -0.9 -1.3 -0.4 -0.7 -0.6
Germany -0.5 0.0 0.3 -0.4 0.3 -0.7 -1.4 -1.7 -0.9 -1.6 -1.3 -0.6
Estonia 0.3 -0.4 1.0 0.9 0.1 -3.9 -4.3 -3.4 -1.5 -4.7 -3.8 -1.6
Ireland -0.9 0.3 -2.5 5.4 9.8 0.2 -1.2 -0.6 -0.6 -2.3 -1.2 -0.4
Greece -0.6 -16.4 -10.7 -6.0 -0.9 0.7 1.8 2.4 2.7 1.7 2.3 2.5
Spain -0.5 -7.8 -1.7 -4.0 0.1 0.6 1.5 1.7 1.6 1.3 1.2 1.0
France 0.2 -1.4 -1.0 -1.2 0.2 0.0 0.0 -0.5 -0.2 -0.1 -0.3 0.0
Croatia 3.2 -3.9 -0.8 0.0 3.5 2.6 2.2 1.4 0.7 1.9 1.6 1.2
Italy 0.7 -3.6 -2.9 -1.7 1.8 1.5 1.0 0.6 0.7 0.7 0.7 1.0
Cyprus 2.8 -6.1 -0.4 1.9 4.7 3.2 2.8 2.2 1.7 2.6 1.9 1.2
Latvia 0.5 -1.7 0.9 -0.3 -0.1 0.7 -0.5 -1.3 -0.7 -0.6 -1.0 -0.5
Lithuania -0.1 -1.8 2.0 1.8 0.9 -1.8 -1.7 -1.8 -0.9 -2.2 -1.8 -0.9
Luxembourg 1.0 -1.9 -0.7 1.3 -1.4 -3.5 -3.6 -3.1 -2.5 -3.7 -3.2 -2.9
Malta 0.0 -0.3 0.4 0.2 -1.5 -0.8 -0.1 -0.5 -1.0 -0.4 -0.7 -1.0
Netherlands -0.1 -2.0 -0.5 -0.6 2.2 0.2 -0.7 -1.0 -1.2 -0.9 -1.0 -1.1
Austria 0.1 -0.6 -0.4 -1.8 2.4 0.3 -1.2 -1.7 -1.1 -1.4 -1.1 -0.5
Portugal -0.5 -2.9 -0.3 -3.4 1.0 1.1 0.7 0.2 0.4 0.3 0.0 0.3
Slovakia 2.3 -1.9 0.1 1.6 0.6 0.5 -0.3 -0.8 -1.4 -0.8 -0.7 -0.4
Slovenia 3.1 -6.0 -0.2 2.4 2.7 2.0 1.3 1.0 1.2 1.1 1.2 1.3
Finland 0.7 -2.1 -0.2 -0.3 -0.6 -2.2 -2.9 -2.5 -1.7 -3.2 -2.4 -1.3
Euro area 0.0 -2.3 -1.1 -1.1 1.0 0.1 -0.3 -0.5 -0.2 -0.5 -0.4 0.0
Bulgaria 1.4 -0.4 -0.9 0.4 2.0 1.2 0.7 -0.1 -0.5 0.2 0.3 0.8
Czechia 2.6 -2.2 0.8 -0.7 0.7 -1.4 -1.7 -1.1 -0.5 -2.1 -1.3 -0.4
Denmark 0.5 -3.0 -1.6 -0.3 -1.7 -1.9 -0.8 0.4 0.3 -0.8 -0.1 0.0
Hungary -1.5 -2.7 1.6 0.8 2.4 -0.3 -1.0 -1.2 0.0 -1.4 -1.1 0.3
Poland 1.7 -0.8 0.2 0.6 1.6 -1.1 -0.8 -0.3 0.0 -1.0 -0.4 0.0
Romania 1.8 -1.8 -1.0 -2.3 -0.2 -0.6 -1.7 -2.0 -1.5 -2.0 -1.7 -1.1
Sweden -0.1 -1.0 -0.4 0.4 0.1 -1.4 -1.7 -1.9 -1.4 -2.3 -1.9 -0.7
EU 0.1 -2.3 -1.0 -1.0 1.0 -0.1 -0.4 -0.6 -0.3 -0.6 -0.5 -0.1
United Kingdom -1.0 -2.0 -1.1 -2.5 0.9 0.0 -0.3 -0.6 -0.7 -0.5 -0.4 -0.5
Japan : : : : : : :
: : : : : :
United States -0.6 -0.9 -0.5 -0.2 0.1 0.6 0.9 0.1 -0.6 0.5 0.1 -0.2
¹ When comparing output gaps between successive forecasts it has to be taken into account that the overall revisions to the forecast may have led to changes in the estimates for potential output.

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 Statistical Annex

Table 15: Deflator of gross domestic product (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.7 1.6 1.8 2.7 6.8 4.5 1.9 2.8 2.1 2.7 2.4 2.1
Germany 1.2 1.6 1.7 2.8 6.1 6.1 3.1 2.4 2.2 2.9 2.4 2.2
Estonia 5.8 3.6 3.1 5.4 15.8 8.1 3.7 3.9 2.6 5.1 4.0 3.3
Ireland -0.7 2.9 0.8 1.1 6.8 3.6 3.3 2.7 2.1 3.3 2.1 1.7
Greece 2.9 -0.7 -0.1 1.4 6.5 5.9 3.2 3.4 2.3 3.5 2.4 2.2
Spain 2.1 0.1 1.1 2.6 4.7 6.2 3.0 2.3 2.0 3.1 2.4 2.0
France 1.6 0.9 1.3 1.2 3.2 5.3 2.3 1.7 1.5 2.2 1.6 1.7
Croatia 3.5 0.8 1.2 2.1 8.0 11.7 5.5 4.3 2.6 6.6 3.2 2.1
Italy 1.9 1.2 1.1 1.3 3.5 5.9 2.1 2.2 1.7 1.6 1.9 1.8
Cyprus 2.8 0.0 0.3 3.0 6.7 3.8 3.5 2.6 2.3 3.5 2.3 2.2
Latvia 6.8 2.3 2.7 3.3 9.8 6.0 2.6 3.9 2.8 2.5 2.9 2.1
Lithuania 4.7 1.9 2.6 6.0 16.1 9.0 3.4 3.6 2.4 3.6 3.5 2.2
Luxembourg 4.1 2.8 1.5 5.9 6.2 6.3 5.2 2.5 2.8 3.9 3.0 2.9
Malta 2.6 2.5 2.1 2.4 5.1 5.3 3.2 2.5 2.2 2.6 2.5 2.1
Netherlands 1.6 0.8 2.0 2.7 6.2 7.3 5.2 3.7 2.6 5.0 3.0 2.3
Austria 1.8 2.0 1.7 1.9 4.8 6.6 3.1 3.5 2.2 4.2 2.3 1.9
Portugal 1.9 0.9 1.8 2.0 5.3 7.0 4.4 3.1 2.2 3.8 2.5 2.2
Slovakia 1.3 0.6 1.5 2.2 7.5 10.1 3.6 3.9 3.3 4.4 3.8 2.8
Slovenia 2.6 0.9 1.6 2.7 6.5 10.1 3.1 2.8 2.7 3.0 3.7 2.8
Finland 1.8 2.3 1.2 2.5 6.2 3.5 1.4 1.8 1.7 1.4 2.1 1.9
Euro area 1.6 1.2 1.4 2.1 5.1 6.0 2.9 2.5 2.0 2.9 2.2 2.0
Bulgaria 6.1 2.3 4.4 7.0 15.9 8.0 6.5 5.4 2.5 4.8 2.3 2.8
Czechia 1.7 1.3 2.9 4.0 8.7 8.1 4.0 2.9 2.8 4.0 2.4 2.4
Denmark 2.5 1.1 1.2 2.8 9.1 -3.8 1.8 1.7 1.9 1.6 2.2 1.9
Hungary 4.1 2.8 4.3 6.2 14.2 15.2 7.3 4.9 3.6 7.2 4.1 3.3
Poland 3.0 1.5 2.1 5.3 10.7 9.9 3.6 4.2 3.1 3.9 4.6 3.0
Romania 10.4 2.8 4.9 5.6 12.1 12.8 8.8 6.5 5.8 9.0 5.9 5.3
Sweden 2.3 1.4 2.1 2.7 5.8 6.0 2.8 1.7 1.7 2.3 1.4 1.3
EU 1.9 1.2 1.6 2.4 5.8 6.1 3.1 2.7 2.2 3.1 2.4 2.1
United Kingdom 2.4 1.6 2.6 0.1 5.4 6.9 4.0 3.0 1.9 2.7 2.0 1.8
Japan -1.0 0.2 0.4 -0.2 0.4 4.1 2.9 2.0 1.9 2.8 1.6 1.3
United States 1.9 1.8 1.7 4.6 7.1 3.6 2.4 2.7 2.1 2.4 2.1 2.0

Table 16: Price deflator of private consumption (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.9 1.5 1.6 2.7 10.2 6.0 1.6 2.3 1.9 2.2 2.1 1.8
Germany 1.3 1.3 1.2 2.9 6.8 6.7 2.7 1.9 2.0 2.7 2.6 2.6
Estonia 4.8 2.7 2.2 4.1 17.5 8.8 3.2 3.8 1.8 3.1 3.6 2.5
Ireland -0.2 1.2 0.9 2.8 7.5 8.6 4.3 2.0 1.7 3.8 2.2 1.9
Greece 2.9 -0.3 -0.3 1.0 5.8 4.6 3.6 3.1 2.3 2.7 2.4 2.3
Spain 2.3 1.1 0.9 2.2 6.5 5.4 4.0 2.4 2.0 2.8 2.2 1.9
France 1.3 0.8 0.9 1.4 4.8 7.0 2.0 0.9 1.3 2.5 1.6 1.8
Croatia 3.3 1.3 0.6 2.6 10.6 8.7 3.2 2.8 2.0 2.7 2.4 2.0
Italy 1.9 1.4 0.9 1.5 6.8 5.0 1.4 1.6 1.3 1.1 1.7 1.6
Cyprus 3.0 0.4 -0.1 1.3 6.2 3.7 1.8 1.6 1.5 2.2 1.9 1.7
Latvia 6.3 1.5 1.9 2.6 13.8 9.0 3.4 3.0 1.7 1.2 2.2 2.2
Lithuania 5.4 1.5 2.2 4.6 18.6 9.0 0.8 2.6 1.2 0.9 1.7 1.6
Luxembourg 1.7 1.6 1.4 1.6 5.5 4.7 3.2 2.4 2.0 2.2 2.7 2.0
Malta 2.4 1.6 1.2 1.1 5.3 6.3 3.2 2.2 2.0 3.0 2.2 2.0
Netherlands 1.5 1.4 1.8 4.4 7.5 6.9 2.6 2.3 1.6 3.3 2.5 2.1
Austria 1.7 2.1 1.6 2.1 7.7 8.4 3.2 2.9 2.1 3.4 2.5 2.0
Portugal 1.9 1.1 1.1 2.0 7.3 4.4 2.6 2.1 2.0 2.7 2.2 2.1
Slovakia 2.6 1.6 1.4 3.2 11.8 10.3 3.4 4.0 2.7 2.8 4.3 2.6
Slovenia 2.7 0.9 0.8 3.4 9.9 7.5 2.2 2.1 1.9 2.1 3.3 2.1
Finland 2.0 2.1 0.8 2.2 6.5 4.3 2.1 2.0 1.6 1.2 2.0 1.8
Euro area 1.7 1.2 1.1 2.3 6.7 6.3 2.5 1.9 1.7 2.5 2.2 2.1
Bulgaria 3.9 1.8 2.0 6.0 16.0 8.1 4.9 3.5 2.5 5.0 2.0 3.0
Czechia 2.5 1.1 2.6 4.2 14.3 8.1 3.0 2.4 2.0 3.0 2.6 2.2
Denmark 2.2 1.2 0.5 2.0 7.1 2.9 1.6 1.8 1.6 1.8 2.0 1.7
Hungary 4.6 2.3 3.0 5.9 14.8 14.3 5.5 4.1 3.3 4.2 3.6 3.2
Poland 2.7 1.5 1.6 5.6 14.1 9.5 3.4 3.6 3.0 3.8 4.6 2.9
Romania 7.1 2.4 3.0 4.6 13.9 9.8 6.2 5.8 4.7 5.3 4.6 4.3
Sweden 1.6 0.9 1.6 2.2 6.7 6.5 2.8 2.0 1.7 2.4 1.4 1.6
EU 1.8 1.2 1.2 2.5 7.4 6.6 2.7 2.1 1.9 2.6 2.3 2.2
United Kingdom 2.1 1.7 1.4 2.5 8.1 6.8 3.0 2.5 1.9 2.3 2.1 1.9
Japan -0.7 0.3 0.3 0.6 2.9 3.0 2.3 1.9 1.7 2.5 1.8 1.6
United States 2.0 1.6 1.5 4.1 6.6 3.8 2.5 2.7 2.2 2.5 2.0 2.0

195
European Economic Forecast, Spring 2025

Table 17a: Harmonised index of consumer prices (national index if not available), (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.2 1.7 1.6 3.2 10.3 2.3 4.3 2.8 1.8 4.4 2.9 1.9
Germany 1.6 1.5 1.1 3.2 8.7 6.0 2.5 2.4 1.9 2.4 2.1 1.9
Estonia 4.9 2.6 1.9 4.5 19.4 9.1 3.7 3.8 2.3 3.6 3.6 2.4
Ireland 1.1 0.8 0.2 2.4 8.1 5.2 1.3 1.6 1.4 1.4 1.9 1.8
Greece 3.3 0.2 0.2 0.6 9.3 4.2 3.0 2.8 2.3 3.0 2.4 1.9
Spain 2.5 1.2 0.8 3.0 8.3 3.4 2.9 2.3 1.9 2.8 2.2 2.0
France 1.7 1.2 1.1 2.1 5.9 5.7 2.3 0.9 1.2 2.4 1.9 1.8
Croatia 3.0 1.6 0.6 2.7 10.7 8.4 4.0 3.4 2.0 4.0 3.4 2.0
Italy 2.0 1.6 0.6 1.9 8.7 5.9 1.1 1.8 1.5 1.1 1.9 1.7
Cyprus 2.3 1.0 -0.1 2.3 8.1 3.9 2.3 2.0 2.0 2.2 2.1 2.0
Latvia 6.8 1.5 1.7 3.2 17.2 9.1 1.3 3.0 1.7 1.2 2.2 2.2
Lithuania 5.2 1.6 2.0 4.6 18.9 8.7 0.9 2.6 1.2 0.9 1.7 1.6
Luxembourg 2.5 1.8 1.2 3.5 8.2 2.9 2.3 2.1 1.8 2.3 2.4 1.8
Malta 2.4 1.7 1.2 0.7 6.1 5.6 2.4 2.2 2.1 2.5 2.2 2.0
Netherlands 1.5 1.7 1.4 2.8 11.6 4.1 3.2 3.0 2.0 3.2 2.4 1.9
Austria 1.8 2.1 1.6 2.8 8.6 7.7 2.9 2.9 2.1 2.9 2.1 1.7
Portugal 1.7 1.4 0.7 0.9 8.1 5.3 2.7 2.1 2.0 2.6 2.1 1.9
Slovakia 2.3 1.8 1.6 2.8 12.1 11.0 3.2 4.0 2.9 3.1 5.1 3.0
Slovenia 3.0 1.3 1.0 2.0 9.3 7.2 2.0 2.1 1.9 2.1 3.2 2.1
Finland 2.0 2.0 0.8 2.1 7.2 4.3 1.0 1.7 1.5 1.0 2.0 1.8
Euro area 1.9 1.4 1.0 2.6 8.4 5.4 2.4 2.1 1.7 2.4 2.1 1.9
Bulgaria 6.5 0.7 1.2 2.8 13.0 8.6 2.6 3.6 1.8 2.5 2.3 2.9
Czechia 2.6 1.6 2.2 3.3 14.8 12.0 2.7 2.2 2.0 2.7 2.4 2.0
Denmark 2.1 1.2 0.6 1.9 8.5 3.4 1.3 1.6 1.5 1.3 1.9 1.7
Hungary 5.3 2.3 2.5 5.2 15.3 17.0 3.7 4.1 3.3 3.8 3.6 3.2
Poland 2.9 1.6 1.7 5.2 13.2 10.9 3.7 3.6 2.8 3.8 4.7 3.0
Romania 6.2 2.7 2.1 4.1 12.0 9.7 5.8 5.1 3.9 5.5 3.9 3.6
Sweden 2.1 0.7 1.5 2.7 8.1 5.9 2.0 2.2 1.6 1.9 1.5 1.8
EU 2.2 1.5 1.1 2.9 9.2 6.4 2.6 2.3 1.9 2.6 2.4 2.0
United Kingdom 2.6 2.1 1.7 2.5 7.9 6.8 3.3 3.6 2.6 3.1 2.4 2.0
Japan -0.1 0.7 0.4 -0.2 2.5 3.3 2.7 2.6 2.3 2.5 1.9 1.6
United States 2.2 1.7 1.8 4.7 8.0 4.1 2.9 3.0 2.3 2.9 2.0 2.0

Table 17b: All-items HICP, excluding energy, food, alcohol and tobacco (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.6 1.6 1.5 1.3 4.0 6.0 3.4 2.1 1.8 3.3 2.4 2.0
Germany 1.2 1.3 1.1 2.2 3.9 5.1 3.2 2.7 2.1 3.2 2.7 2.1
Estonia 3.4 1.9 1.5 2.8 10.3 8.7 5.1 4.5 2.5 4.8 4.5 3.0
Ireland 0.6 0.6 0.4 1.7 4.6 4.4 2.3 1.7 1.6 2.3 2.2 2.0
Greece 2.7 -0.7 0.2 -1.1 4.6 5.3 3.6 3.5 2.6 3.4 2.7 2.0
Spain 1.9 0.8 0.9 0.6 3.8 4.1 2.8 2.1 1.9 2.9 2.3 2.0
France 1.4 1.0 0.7 1.3 3.4 4.0 2.3 1.7 1.4 2.3 2.2 2.1
Croatia 2.5 0.6 0.7 1.3 7.6 8.8 4.8 3.4 2.4 4.7 2.9 2.2
Italy 1.8 1.3 0.6 0.8 3.3 4.5 2.2 2.0 1.8 2.3 2.0 1.8
Cyprus 1.3 0.4 0.0 1.3 5.0 3.8 2.6 2.4 2.1 2.6 2.5 2.4
Latvia 3.9 0.6 1.6 1.9 7.6 8.4 3.7 3.1 2.4 3.7 2.7 2.2
Lithuania 2.5 1.3 2.2 3.4 10.5 9.6 3.2 3.0 2.7 3.3 2.3 2.1
Luxembourg 2.0 1.9 1.3 1.5 4.2 3.9 2.5 2.0 1.8 2.6 2.7 2.1
Malta 1.4 1.3 1.1 0.7 5.8 4.9 2.1 2.0 1.9 2.1 1.9 1.8
Netherlands 1.1 1.6 1.2 1.8 4.8 6.4 3.2 2.8 2.0 3.3 2.8 2.1
Austria 1.6 2.1 1.8 2.3 5.1 7.3 3.9 2.9 2.4 3.9 2.3 1.8
Portugal 1.3 0.8 0.6 0.2 5.0 5.4 2.7 2.5 2.3 2.6 2.3 2.2
Slovakia 1.7 1.5 1.7 3.3 8.2 9.5 4.3 5.2 3.0 4.2 4.2 2.9
Slovenia 1.8 0.4 1.0 0.9 5.9 6.7 2.9 2.2 2.2 2.9 3.2 2.8
Finland 1.6 1.6 0.6 1.2 3.6 4.1 2.2 1.9 1.5 2.2 2.6 2.1
Euro area 1.5 1.2 0.9 1.5 4.0 5.0 2.8 2.4 1.9 2.9 2.4 2.0
Bulgaria 5.5 -0.1 0.7 1.4 7.6 8.9 3.1 3.6 1.8 2.9 2.4 3.0
Czechia 1.4 0.6 2.0 3.6 12.0 9.3 4.1 2.4 2.2 4.2 3.0 2.3
Denmark 1.5 1.1 0.6 0.7 4.3 4.6 1.3 1.3 1.4 1.4 1.7 1.6
Hungary 3.5 2.1 2.0 3.5 10.7 14.0 5.9 4.9 3.7 6.0 4.0 3.4
Poland 1.5 1.1 1.5 4.8 9.8 9.3 3.9 3.2 2.9 4.0 3.4 3.2
Romania 4.8 2.6 1.6 2.6 6.0 9.7 8.4 5.4 4.3 8.3 4.7 4.1
Sweden 1.4 0.6 1.3 1.8 4.8 6.6 3.2 2.1 1.6 3.1 1.8 1.4
EU 1.6 1.2 1.0 1.8 4.7 5.7 3.1 2.5 2.0 3.2 2.6 2.2
United Kingdom 1.8 1.9 1.8 : : : :
: : : : : :
Japan : : : : : : :
: : : : : :
United States : : : : : :: : : : : : :

196
 Statistical Annex

Incorrect slice name

Table 18: Harmonised index of consumer prices (national index if not available), (percentage change on preceding year, 2024-26) 30.04.2025

2024/1 2024/2 2024/3 2024/4 2025/1 2025/2 2025/3 2025/4 2026/1 2026/2 2026/3 2026/4
Belgium 3.0 5.1 4.7 4.6 4.1 2.8 2.2 2.0 1.9 2.0 1.8 1.6
Germany 2.7 2.6 2.2 2.5 2.6 2.5 2.3 2.0 2.1 1.8 1.9 1.9
Estonia 4.5 3.0 3.4 4.1 4.4 4.0 3.5 3.2 2.4 2.3 2.2 2.3
Ireland 2.2 1.7 0.9 0.5 1.6 1.4 1.6 2.0 1.7 1.4 1.2 1.2
Greece 3.2 2.7 3.1 3.0 3.1 3.3 2.6 2.4 2.1 2.2 2.3 2.4
Spain 3.2 3.6 2.3 2.4 2.7 2.2 2.1 2.0 2.0 1.9 1.9 1.8
France 3.0 2.5 2.1 1.7 1.2 0.8 0.8 0.8 0.9 1.2 1.3 1.3
Croatia 4.8 4.2 3.1 4.0 4.7 3.7 2.9 2.4 1.8 2.2 2.2 1.8
Italy 1.0 0.9 1.2 1.3 1.8 2.0 1.7 1.5 1.1 1.4 1.7 1.7
Cyprus 2.0 2.7 2.1 2.3 2.4 1.9 1.9 1.9 1.9 1.9 2.0 2.0
Latvia 0.9 0.9 1.1 2.6 3.4 3.0 3.0 2.5 1.5 1.6 1.8 1.8
Lithuania 0.9 0.8 0.8 1.0 3.4 1.9 2.7 2.6 0.7 1.5 1.1 1.4
Luxembourg 3.1 3.0 1.7 1.2 1.9 2.4 2.2 1.9 1.8 1.8 1.8 1.8
Malta 3.1 2.3 2.3 2.1 2.0 2.2 2.2 2.2 2.2 2.1 2.0 2.0
Netherlands 3.0 2.9 3.4 3.7 3.3 3.3 2.8 2.4 2.0 2.0 1.9 1.9
Austria 4.1 3.3 2.4 2.0 3.3 2.7 2.8 2.8 1.6 2.2 2.3 2.2
Portugal 2.5 3.1 2.3 2.8 2.3 2.1 2.1 2.0 2.0 2.0 2.0 2.0
Slovakia 3.6 2.5 3.1 3.5 4.2 4.3 4.0 3.6 2.8 2.9 2.9 2.9
Slovenia 3.4 2.4 1.1 1.2 2.1 2.0 2.0 2.1 2.2 2.0 1.7 1.6
Finland 0.9 0.5 0.9 1.6 1.7 1.7 1.7 1.6 1.6 1.4 1.4 1.4
Euro area 2.6 2.5 2.2 2.2 2.3 2.1 2.0 1.8 1.6 1.7 1.8 1.7
Bulgaria 3.5 2.7 2.2 2.0 3.9 3.9 3.6 3.1 1.5 1.8 2.0 2.1
Czechia 2.4 2.7 2.6 3.1 2.8 2.3 1.8 1.9 2.1 2.0 2.0 2.2
Denmark 0.8 1.5 1.2 1.7 1.6 1.9 1.3 1.4 1.3 1.7 1.4 1.6
Hungary 3.6 3.7 3.5 4.0 5.4 3.7 3.7 3.7 2.5 3.8 3.5 3.2
Poland 3.6 2.9 4.1 4.0 4.4 4.0 3.2 2.9 2.8 2.8 2.7 2.8
Romania 7.1 5.8 5.3 5.3 5.2 4.9 5.4 4.8 4.3 4.0 3.7 3.5
Sweden 2.8 2.1 1.4 1.8 2.3 2.3 2.3 2.0 1.7 1.5 1.5 1.5
EU 2.8 2.6 2.4 2.5 2.7 2.4 2.2 2.0 1.8 1.9 1.9 1.9
United Kingdom 3.9 2.9 2.9 3.4 3.8 3.6 3.5 3.4 3.0 2.8 2.3 2.3
Japan 2.5 2.7 2.8 2.9 2.7 2.6 2.7 2.5 3.1 2.6 2.1 1.5
United States 3.2 3.2 2.7 2.7 2.7 3.0 3.3 3.0 2.6 2.2 2.1 2.1

Table 19: Price deflator of exports of goods in national currency (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.2 0.4 0.4 8.9 13.5 -0.6 -0.5 1.1 1.1 0.8 1.5 1.8
Germany 0.6 0.8 0.2 4.7 12.7 1.5 0.3 0.9 -0.4 0.2 1.3 1.4
Estonia 3.6 0.3 0.9 10.4 23.9 1.2 0.9 1.6 1.5 0.3 1.3 2.1
Ireland 0.0 1.6 -3.0 -2.3 3.1 0.0 0.7 0.6 0.8 1.4 1.2 1.0
Greece 2.7 -0.9 -1.4 14.5 32.0 -8.7 -0.4 0.5 0.9 0.4 0.4 2.1
Spain 1.9 0.9 0.5 9.0 18.3 0.7 0.0 0.7 0.3 1.7 1.5 1.2
France 0.9 0.9 -0.1 6.4 17.9 -2.4 -2.4 1.5 1.0 -3.6 1.2 1.5
Croatia 2.7 1.4 -1.0 6.8 12.2 2.9 -0.6 0.5 0.7 -0.4 1.5 1.9
Italy 1.5 1.0 0.7 5.3 12.4 1.7 -0.3 1.5 1.5 -0.1 2.0 1.7
Cyprus 2.6 1.2 0.0 2.3 2.9 1.9 1.0 0.6 1.1 0.6 1.9 1.5
Latvia 5.6 3.3 1.6 9.7 17.6 -4.9 -0.9 1.6 2.2 -0.6 2.0 2.0
Lithuania 3.3 0.8 0.0 6.4 12.2 -3.0 0.1 1.4 1.2 1.6 2.0 2.0
Luxembourg 3.6 1.5 0.8 9.7 14.0 0.3 -2.4 -0.5 1.8 -2.5 2.3 3.3
Malta 1.8 1.7 1.0 1.0 7.7 4.9 3.3 2.1 2.0 2.8 2.6 2.1
Netherlands 1.3 0.4 -0.6 11.4 23.9 -3.1 -0.8 0.2 0.7 -0.2 2.8 1.3
Austria 1.3 0.4 0.0 6.7 12.1 -0.1 1.4 1.2 1.2 0.7 1.5 1.4
Portugal 1.5 0.2 -0.1 8.3 17.0 -0.6 -1.5 0.1 0.3 -0.8 1.9 1.6
Slovakia 0.1 -0.5 -0.2 5.4 15.8 4.1 -2.1 3.3 3.3 -2.1 3.5 3.1
Slovenia 1.1 0.5 0.1 5.0 17.5 0.5 -1.6 0.6 1.0 -0.6 1.1 1.0
Finland -0.2 0.1 -0.2 12.9 24.1 -7.2 -3.6 2.0 1.8 -0.5 1.0 1.2
Euro area 1.0 0.8 -0.1 6.4 15.0 -0.3 -0.5 1.0 0.7 -0.2 1.6 1.5
Bulgaria 9.1 0.7 1.5 16.8 26.1 -5.9 -1.4 -0.5 1.0 -1.5 1.3 1.8
Czechia -1.5 1.5 -0.4 4.9 9.5 -0.6 3.6 1.8 1.8 4.2 2.8 2.9
Denmark 2.3 1.2 0.1 1.7 12.8 -0.7 -2.2 1.5 0.5 -0.9 1.9 1.2
Hungary 1.2 1.4 2.0 7.7 22.8 -0.2 1.9 1.3 1.1 1.1 2.8 2.0
Poland 3.4 2.8 1.9 10.1 19.7 -4.7 -8.2 -1.0 0.7 -6.9 1.4 1.4
Romania 8.4 0.9 0.3 11.2 17.0 2.1 0.5 2.9 3.4 1.7 3.5 3.8
Sweden 2.0 -0.7 1.4 5.3 18.4 5.0 -1.1 -2.5 0.1 -1.2 1.1 1.4
EU 1.2 0.8 0.1 6.5 15.4 -0.4 -0.8 0.8 0.7 -0.5 1.7 1.6
United Kingdom 3.8 -0.8 2.9 4.8 17.1 0.4 0.4 1.6 0.9 1.1 1.3 0.9
Japan -2.6 1.7 -2.1 7.1 14.5 4.0 6.8 0.4 1.0 7.5 1.4 0.4
United States 1.8 -0.4 -0.7 14.1 11.6 -4.3 -0.4 1.0 1.3 -0.2 1.1 0.8

197
European Economic Forecast, Spring 2025

Table 20: Price deflator of imports of goods in national currency (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.7 0.4 0.2 10.8 19.5 -1.6 -1.0 -0.1 0.8 -0.9 1.2 1.6
Germany 0.5 0.1 -0.5 8.9 18.2 -3.5 -1.4 -1.6 -1.6 -1.3 1.5 1.8
Estonia 3.1 0.9 0.2 9.7 24.0 -2.9 0.3 1.6 1.0 0.1 1.2 1.9
Ireland 1.1 -0.2 -1.6 7.4 7.0 0.3 -3.1 -1.2 -0.2 -2.1 1.0 1.0
Greece 3.2 -1.7 -0.1 15.0 25.3 -12.0 -2.6 -0.2 0.6 -1.1 0.4 2.0
Spain 1.7 1.5 0.2 8.2 25.3 -5.7 -0.4 0.3 0.2 0.7 1.0 1.1
France 0.9 0.0 -0.3 8.8 22.2 -3.8 -3.0 0.2 1.0 -3.0 1.6 1.5
Croatia 1.8 1.3 0.2 7.4 16.1 0.8 -0.5 0.1 0.5 -0.6 1.3 1.8
Italy 2.2 0.2 -0.6 12.2 25.2 -8.2 -3.2 -1.0 0.1 -2.5 2.2 1.7
Cyprus 2.3 -0.4 0.6 2.6 5.1 0.8 0.5 1.2 1.3 0.6 1.8 1.3
Latvia 5.0 2.3 -0.9 9.5 21.6 -7.5 -1.8 1.5 0.9 0.2 1.6 2.2
Lithuania 4.1 0.5 -0.8 13.7 26.2 -8.1 -2.7 1.3 0.9 -0.7 1.3 1.8
Luxembourg 2.3 0.8 0.4 8.4 21.6 -0.7 -1.6 -1.3 0.5 0.1 0.7 1.7
Malta 1.5 1.3 0.2 0.8 6.3 4.2 3.1 2.0 2.0 2.8 2.2 2.2
Netherlands 1.7 0.2 -1.1 12.8 29.1 -6.4 -3.3 -1.3 -0.8 -2.5 2.2 1.2
Austria 1.7 0.5 0.2 8.1 20.3 0.9 -0.9 -1.2 1.0 -0.6 1.3 1.3
Portugal 0.9 -0.5 -0.4 8.2 20.5 -3.9 -3.8 -1.1 0.3 -2.6 1.8 1.6
Slovakia 1.4 0.2 0.4 6.5 21.1 3.7 -3.5 3.1 2.9 -3.9 4.2 3.1
Slovenia 1.6 0.4 -0.1 7.4 21.0 -3.3 -2.5 0.4 0.6 -1.3 1.0 0.9
Finland 0.8 -0.5 -0.4 12.4 23.3 -4.9 -1.2 1.5 1.3 0.0 1.3 1.9
Euro area 1.3 0.3 -0.4 9.8 21.8 -4.3 -2.1 -0.6 -0.1 -1.6 1.6 1.6
Bulgaria 4.8 0.7 -0.7 16.4 23.2 -3.6 -0.6 -0.1 0.3 0.0 2.3 2.8
Czechia -0.7 1.3 -0.8 5.0 14.3 -3.8 2.3 0.9 1.0 3.0 3.0 2.7
Denmark 1.1 0.7 -0.3 6.7 22.1 -2.4 -1.2 1.0 0.6 -0.3 1.3 1.6
Hungary 1.6 1.5 1.4 11.9 31.8 -6.1 1.3 0.7 0.9 0.5 2.8 1.8
Poland 2.8 2.0 1.0 12.3 24.3 -6.3 -6.9 -4.0 0.7 -6.1 1.0 1.9
Romania 3.7 0.9 0.0 10.2 18.7 0.7 -0.8 1.5 1.6 -1.9 1.3 1.8
Sweden 1.3 -1.1 1.0 5.1 24.0 4.3 -1.6 -3.5 -0.1 -0.9 1.0 1.6
EU 1.4 0.4 -0.2 9.7 21.9 -4.0 -2.1 -0.7 0.1 -1.7 1.6 1.6
United Kingdom 2.8 -1.1 2.4 4.7 19.9 -0.4 -2.9 0.2 1.1 -0.7 1.9 0.9
Japan 0.8 2.5 -3.0 17.8 32.1 -2.3 2.9 0.6 1.4 4.9 1.5 0.8
United States 2.1 -1.0 -0.9 7.6 7.5 -3.2 0.5 0.8 1.5 0.5 0.9 0.6

Table 21: Terms of trade of goods (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium -0.5 0.0 0.1 -1.7 -5.0 1.0 0.5 1.1 0.3 1.7 0.3 0.2
Germany 0.1 0.7 0.7 -3.9 -4.7 5.2 1.7 2.5 1.2 1.4 -0.2 -0.4
Estonia 0.4 -0.6 0.6 0.6 -0.1 4.2 0.6 0.0 0.5 0.2 0.1 0.2
Ireland -1.1 1.8 -1.4 -9.1 -3.7 -0.3 4.0 1.8 1.0 3.6 0.2 0.0
Greece -0.5 0.8 -1.3 -0.4 5.3 3.8 2.3 0.7 0.3 1.5 0.0 0.2
Spain 0.2 -0.6 0.3 0.7 -5.6 6.8 0.4 0.4 0.1 1.0 0.5 0.1
France 0.1 0.9 0.1 -2.3 -3.5 1.5 0.6 1.3 0.0 -0.6 -0.4 0.0
Croatia 0.9 0.0 -1.2 -0.5 -3.3 2.0 -0.1 0.4 0.2 0.2 0.2 0.1
Italy -0.7 0.9 1.3 -6.1 -10.2 10.8 3.0 2.5 1.4 2.5 -0.2 0.0
Cyprus 0.3 1.6 -0.6 -0.3 -2.1 1.1 0.5 -0.6 -0.2 0.0 0.1 0.2
Latvia 0.6 0.9 2.6 0.2 -3.3 2.9 0.9 0.1 1.3 -0.8 0.4 -0.2
Lithuania -0.8 0.3 0.9 -6.4 -11.1 5.4 2.9 0.1 0.3 2.3 0.7 0.2
Luxembourg 1.3 0.7 0.4 1.2 -6.3 1.0 -0.9 0.8 1.3 -2.6 1.6 1.6
Malta 0.3 0.4 0.8 0.2 1.3 0.7 0.2 0.1 0.0 0.0 0.3 0.0
Netherlands -0.4 0.2 0.5 -1.2 -4.1 3.6 2.5 1.4 1.6 2.4 0.5 0.1
Austria -0.4 0.0 -0.2 -1.3 -6.8 -1.0 2.3 2.4 0.2 1.3 0.2 0.1
Portugal 0.6 0.8 0.2 0.1 -2.9 3.4 2.4 1.2 0.0 1.8 0.1 0.0
Slovakia -1.4 -0.7 -0.6 -1.1 -4.4 0.5 1.5 0.2 0.4 1.9 -0.7 0.0
Slovenia -0.5 0.1 0.2 -2.3 -2.9 4.0 0.8 0.2 0.4 0.7 0.1 0.1
Finland -1.0 0.6 0.2 0.5 0.7 -2.4 -2.5 0.5 0.5 -0.5 -0.3 -0.7
Euro area -0.3 0.5 0.3 -3.1 -5.7 4.4 1.6 1.6 0.8 1.4 0.0 -0.1
Bulgaria 4.1 -0.1 2.2 0.3 2.4 -2.4 -0.8 -0.4 0.7 -1.5 -1.0 -1.0
Czechia -0.7 0.2 0.4 -0.1 -4.2 3.3 1.3 0.9 0.8 1.2 -0.2 0.2
Denmark 1.2 0.5 0.4 -4.7 -7.7 1.7 -1.0 0.5 -0.1 -0.6 0.6 -0.4
Hungary -0.4 -0.1 0.5 -3.7 -6.9 6.3 0.6 0.6 0.2 0.5 0.0 0.2
Poland 0.5 0.8 0.9 -2.0 -3.7 1.7 -1.4 3.1 0.0 -0.9 0.4 -0.4
Romania 4.5 0.0 0.4 0.9 -1.4 1.3 1.3 1.4 1.8 3.7 2.2 2.0
Sweden 0.7 0.4 0.4 0.1 -4.5 0.7 0.5 1.0 0.2 -0.4 0.1 -0.2
EU -0.2 0.5 0.4 -2.9 -5.4 3.9 1.3 1.6 0.7 1.2 0.1 -0.1
United Kingdom 1.0 0.4 0.5 0.1 -2.3 0.8 3.4 1.4 -0.2 1.8 -0.6 0.0
Japan -3.5 -0.8 1.0 -9.1 -13.3 6.4 3.7 -0.2 -0.4 2.5 0.0 -0.4
United States -0.2 0.6 0.1 6.0 3.8 -1.1 -0.9 0.2 -0.3 -0.6 0.2 0.2

198
 Statistical Annex

Table 22: Total population (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.8 0.7 0.5 0.4 0.8 0.9 0.6 0.4 0.4 0.4 0.3 0.3
Germany -0.3 0.3 0.4 0.0 0.7 0.9 0.2 0.2 0.1 0.3 0.2 0.2
Estonia -0.4 -0.3 0.2 0.1 0.1 2.6 0.6 -0.2 -0.2 0.0 0.0 0.0
Ireland 1.9 0.6 1.4 1.1 2.1 1.8 1.7 1.2 1.0 1.8 1.2 1.0
Greece 0.2 -0.5 -0.2 -0.5 -0.6 -0.3 -0.2 -0.2 -0.2 -0.5 -0.4 -0.3
Spain 1.3 -0.1 0.4 0.0 0.9 1.3 0.9 0.8 0.7 1.2 1.0 0.8
France 0.6 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
Croatia -0.1 -0.4 -1.3 -0.7 -0.1 0.6 -0.1 0.0 0.0 0.1 -0.1 -0.1
Italy 0.6 0.1 -0.3 -0.5 -0.2 0.0 0.0 -0.1 -0.1 0.0 -0.2 -0.3
Cyprus 2.3 0.8 1.0 1.5 1.9 1.9 1.6 1.4 1.2 1.3 1.0 1.0
Latvia -1.3 -1.2 -0.8 -0.8 0.1 -0.2 -1.1 -0.7 -0.8 -1.1 -0.7 -0.8
Lithuania -1.4 -1.2 -0.7 -0.1 0.8 1.4 0.6 0.2 -0.3 0.4 -0.5 -0.7
Luxembourg 1.7 2.3 2.1 1.6 2.2 1.9 1.6 1.8 1.7 1.7 1.8 1.7
Malta 0.5 1.4 3.0 0.5 2.7 4.1 3.2 2.5 2.0 3.5 2.5 2.0
Netherlands 0.4 0.4 0.6 0.5 1.0 1.0 0.7 0.5 0.4 0.6 0.5 0.4
Austria 0.3 0.6 0.7 0.4 1.1 0.9 0.5 0.2 0.2 0.3 0.2 0.2
Portugal 0.1 -0.4 0.0 0.2 0.6 1.0 1.0 0.7 0.6 0.9 0.4 0.2
Slovakia 0.2 0.0 0.1 -0.4 0.3 0.0 0.0 -0.2 -0.3 0.2 -0.2 -0.3
Slovenia 0.5 0.1 0.4 0.2 0.1 0.5 0.3 0.2 0.2 0.2 0.2 0.2
Finland 0.4 0.4 0.2 0.2 0.3 0.4 0.7 0.4 0.2 0.7 0.5 0.1
Euro area 0.4 0.2 0.2 0.0 0.5 0.6 0.4 0.3 0.3 0.4 0.3 0.2
Bulgaria -0.5 -1.5 -1.3 -0.7 -0.6 -0.3 -0.2 -0.4 -0.6 -0.4 -0.4 -0.6
Czechia 0.5 0.0 0.0 0.0 2.5 1.1 0.1 0.2 0.2 0.3 0.2 0.2
Denmark 0.5 0.5 0.5 0.4 0.9 0.7 0.5 0.4 0.5 0.5 0.4 0.5
Hungary -0.2 -0.4 -0.3 -0.4 -0.3 -0.1 -0.3 -0.3 -0.2 -0.2 -0.3 -0.3
Poland -0.1 0.0 -0.4 -0.5 2.2 -0.4 -0.4 -0.1 -0.1 -0.1 -0.1 -0.1
Romania -1.0 -0.4 -0.5 -0.8 -0.5 0.1 0.0 -0.1 -0.1 0.0 -0.1 -0.1
Sweden 0.8 0.9 1.1 0.6 1.1 0.7 0.4 0.3 0.2 0.1 0.2 0.1
EU 0.3 0.1 0.1 0.0 0.6 0.5 0.3 0.2 0.2 0.3 0.2 0.2
United Kingdom 0.8 0.7 0.5 0.4 0.9 1.3 1.1 0.7 0.7 0.7 0.7 0.7
Japan 0.0 -0.1 -0.2 -0.1 -0.4 -0.6 -0.5 -0.5 -0.5 -0.5 -0.5 0.5
United States 0.9 0.8 0.6 0.2 0.6 0.8 0.9 0.8 0.8 0.8 0.8 0.8

Table 23: Total employment in persons (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.0 0.5 1.1 1.7 1.9 0.8 0.3 0.3 0.5 0.3 0.5 0.6
Germany 0.9 1.0 0.8 0.2 1.4 0.7 0.2 -0.2 0.2 0.3 0.1 0.1
Estonia -2.1 2.6 0.5 0.1 4.6 3.2 0.2 -0.1 0.2 -1.2 -0.2 0.6
Ireland -1.0 1.3 2.1 6.6 6.9 3.5 2.7 1.7 1.2 2.3 1.9 1.6
Greece 0.2 -1.6 1.4 5.1 2.4 1.2 1.2 1.1 0.9 1.1 0.9 0.8
Spain -0.1 -1.0 1.0 2.6 3.5 3.0 2.2 2.1 1.6 2.3 2.1 2.0
France 0.4 0.4 0.8 2.6 2.4 1.1 0.6 -0.2 0.5 0.5 0.1 0.4
Croatia 0.7 -1.3 0.6 1.2 2.2 2.2 6.1 2.6 1.1 3.1 2.0 1.1
Italy 0.2 -0.2 0.4 1.0 1.9 1.9 1.6 0.9 0.3 1.6 0.8 0.2
Cyprus 2.1 -1.9 4.1 2.9 4.0 1.4 2.0 1.3 1.1 1.9 1.3 1.2
Latvia -2.5 1.1 0.6 -1.3 0.2 0.1 -0.9 -0.4 -0.4 -0.3 -0.4 -0.4
Lithuania -2.5 1.5 0.4 1.3 4.9 1.4 1.7 0.4 0.3 1.9 0.1 -0.3
Luxembourg 3.2 2.5 3.1 2.9 3.3 2.1 1.1 1.3 1.7 0.9 1.6 1.7
Malta 1.4 3.4 5.3 2.8 4.9 6.8 5.1 3.1 2.8 4.3 3.1 2.8
Netherlands 1.0 0.0 1.7 1.7 3.9 1.6 1.0 0.3 0.2 0.9 0.4 0.4
Austria 1.1 0.9 0.8 2.0 2.6 0.8 0.0 0.1 0.4 0.2 0.5 0.6
Portugal -0.7 -1.2 1.3 1.4 3.7 1.0 1.6 1.0 0.9 1.1 0.9 0.8
Slovakia 0.8 0.9 1.2 -0.6 1.8 0.3 -0.2 -0.1 -0.1 0.2 0.1 0.1
Slovenia 0.7 -0.4 1.9 1.3 2.9 1.6 0.1 0.6 0.7 0.3 0.7 0.7
Finland 0.6 0.2 0.6 2.3 3.5 0.9 -0.6 0.2 0.5 -0.6 0.6 0.8
Euro area 0.4 0.2 0.9 1.6 2.4 1.4 1.0 0.5 0.5 0.9 0.6 0.6
Bulgaria 0.7 -0.9 -0.2 0.1 1.1 1.1 1.1 0.4 0.3 0.5 0.1 0.1
Czechia 0.6 0.5 0.2 1.0 1.0 1.0 0.3 0.4 0.2 0.5 0.4 0.2
Denmark 0.1 0.3 1.0 2.3 4.0 1.3 0.8 0.5 0.0 0.8 0.3 0.3
Hungary -0.9 1.8 1.3 1.8 1.5 0.3 0.1 0.1 0.3 0.2 0.2 0.3
Poland 1.8 0.8 1.1 2.9 1.1 0.1 -0.7 0.1 0.3 -0.3 0.2 0.1
Romania -0.9 -0.5 -0.1 0.8 0.7 -1.5 1.8 0.6 0.7 1.5 0.5 0.7
Sweden 0.7 1.4 1.1 1.3 3.5 1.2 -0.3 0.2 0.5 -0.4 0.5 0.8
EU 0.4 0.3 0.9 1.6 2.2 1.2 0.8 0.5 0.5 0.8 0.6 0.5
United Kingdom 0.3 1.4 0.8 0.0 1.2 1.2 0.8 0.3 0.4 0.1 0.6 0.6
Japan 0.0 0.0 0.8 -0.1 0.2 0.4 0.5 0.4 0.2 0.2 0.1 0.1
United States -0.6 1.6 0.0 3.3 3.7 1.8 0.8 0.7 0.5 0.2 0.3 0.8

199
European Economic Forecast, Spring 2025

Table 24: Unemployment rate ¹ (number of unemployed as a percentage of total labour force, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 7.9 8.2 6.5 6.3 5.6 5.5 5.7 6.1 5.8 5.6 5.7 5.6
Germany 7.7 4.9 3.5 3.7 3.2 3.1 3.4 3.6 3.3 3.3 3.3 3.4
Estonia 9.2 8.9 5.9 6.2 5.6 6.4 7.6 7.6 7.3 7.5 7.7 7.2
Ireland 8.8 13.3 6.4 6.2 4.5 4.3 4.3 4.3 4.4 4.4 4.4 4.5
Greece 9.7 24.5 20.2 14.7 12.5 11.1 10.1 9.3 8.7 10.4 9.8 9.2
Spain 13.2 23.8 16.3 14.9 13.0 12.2 11.4 10.4 9.9 11.5 11.0 10.7
France 8.5 10.0 9.0 7.9 7.3 7.3 7.4 7.9 7.8 7.4 7.5 7.6
Croatia 10.1 16.1 9.3 7.5 6.8 6.1 5.0 4.6 4.5 5.1 4.7 4.6
Italy 7.3 11.3 10.6 9.5 8.1 7.7 6.5 5.9 5.9 6.8 6.3 6.2
Cyprus 4.8 13.4 9.5 7.2 6.3 5.8 4.9 4.7 4.6 4.9 4.7 4.5
Latvia 11.7 12.8 8.0 7.6 6.9 6.5 6.9 6.8 6.6 6.7 6.7 6.5
Lithuania 9.5 12.1 7.2 7.1 6.0 6.9 7.1 6.8 6.6 7.5 7.0 6.9
Luxembourg 4.7 5.7 6.0 5.3 4.6 5.2 6.4 6.6 6.4 6.0 6.0 5.8
Malta 6.6 6.0 4.3 3.8 3.5 3.5 3.1 3.1 3.1 3.2 3.1 3.0
Netherlands 5.5 7.5 5.4 4.2 3.5 3.6 3.7 3.9 4.0 3.7 3.8 3.9
Austria 5.3 5.6 5.7 6.2 4.8 5.1 5.2 5.3 5.2 5.3 5.3 5.0
Portugal 10.3 15.0 8.3 6.7 6.2 6.5 6.5 6.4 6.3 6.4 6.3 6.2
Slovakia 12.1 13.2 7.3 6.8 6.1 5.8 5.3 5.3 5.3 5.5 5.3 5.1
Slovenia 5.7 9.2 5.8 4.8 4.0 3.7 3.7 3.7 3.8 3.5 3.6 3.6
Finland 7.6 8.5 7.9 7.7 6.8 7.2 8.4 8.6 8.3 8.2 7.9 7.5
Euro area 10.0 11.3 8.6 7.8 6.8 6.6 6.4 6.3 6.1 6.5 6.3 6.3
Bulgaria 8.8 12.4 6.7 5.2 4.2 4.3 4.2 4.0 3.8 4.3 4.0 3.8
Czechia 6.2 6.4 2.7 2.8 2.2 2.6 2.6 2.6 2.6 2.6 2.7 2.7
Denmark 5.1 7.2 5.5 5.1 4.5 5.1 6.2 6.2 6.3 5.8 5.8 5.8
Hungary 8.5 9.1 4.0 4.0 3.6 4.1 4.5 4.4 4.3 4.5 4.3 4.1
Poland 10.1 9.6 4.3 3.4 2.9 2.8 2.9 2.8 2.8 2.9 2.8 2.7
Romania 8.2 8.8 5.9 5.6 5.6 5.6 5.4 5.3 5.2 5.5 5.5 5.4
Sweden 7.4 7.9 7.2 8.9 7.5 7.7 8.4 8.7 8.4 8.5 8.4 7.8
EU 8.7 10.8 7.8 7.1 6.2 6.1 5.9 5.9 5.7 6.1 5.9 5.9
United Kingdom 6.4 7.1 4.4 4.5 3.8 4.0 4.3 4.4 4.4 4.3 4.2 4.2
Japan 4.4 4.0 2.7 2.8 2.6 2.6 2.6 2.5 2.5 2.6 2.5 2.5
United States 6.8 7.2 5.0 5.3 3.6 3.6 4.0 4.3 4.5 4.1 4.4 4.3
¹ Series following Eurostat definition, based on the Labour Force Survey.

Table 25: Compensation of employees per head (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.7 2.0 1.1 4.9 7.5 8.0 2.9 3.6 2.2 3.1 2.9 2.5
Germany 1.5 2.7 2.4 3.2 4.3 5.8 5.2 3.4 2.9 4.8 3.1 2.8
Estonia 9.4 4.8 7.0 9.3 8.2 8.2 5.6 4.5 4.0 5.9 4.4 4.1
Ireland 2.4 1.5 3.0 2.9 2.5 6.8 3.5 3.4 3.3 4.4 3.8 3.7
Greece 2.8 -4.1 -1.4 1.6 1.8 3.7 6.0 3.8 3.5 4.1 3.2 3.0
Spain 3.9 0.0 1.3 4.8 4.9 5.8 5.0 3.4 2.6 4.6 3.1 2.2
France 2.5 1.9 0.2 5.0 4.8 4.2 3.2 2.5 2.0 3.0 2.3 2.0
Croatia 3.0 -0.3 1.7 6.1 12.3 15.9 11.2 8.8 5.3 11.2 4.8 3.8
Italy 2.0 0.4 -0.1 6.8 3.7 2.9 3.4 3.4 2.5 4.0 3.0 2.5
Cyprus 3.2 -1.3 1.7 4.6 7.3 5.0 4.5 3.6 3.3 4.4 3.0 2.8
Latvia 10.1 6.3 6.0 7.6 13.1 15.6 9.1 5.5 4.5 9.2 4.5 4.0
Lithuania 7.2 5.2 8.2 11.8 11.6 11.9 9.1 7.6 7.2 7.9 6.5 5.3
Luxembourg 2.9 2.4 2.0 5.3 4.5 2.4 2.2 3.8 3.3 3.0 3.4 3.3
Malta 3.7 3.6 4.1 4.9 5.0 2.3 5.9 4.1 3.5 4.3 4.1 2.7
Netherlands 2.3 1.5 2.4 2.7 3.6 6.3 6.4 5.1 3.7 6.4 4.7 3.6
Austria 2.4 2.1 2.3 2.9 4.9 6.8 8.4 3.2 3.1 7.3 3.2 2.8
Portugal 2.6 -0.6 2.9 5.9 5.6 8.0 8.0 4.9 4.0 6.5 3.6 3.4
Slovakia 6.4 2.5 4.8 6.9 5.9 10.3 7.3 4.9 4.4 6.6 5.8 5.3
Slovenia 4.9 0.7 3.9 8.0 5.0 9.5 6.2 5.6 4.7 7.1 5.6 4.5
Finland 3.1 1.9 0.8 4.1 2.5 3.4 0.5 2.3 2.3 0.2 2.7 2.4
Euro area 2.4 1.6 1.4 4.3 4.5 5.3 4.5 3.3 2.7 4.3 3.0 2.6
Bulgaria 10.7 6.9 8.0 11.3 14.2 13.4 10.4 9.6 6.1 13.7 10.9 8.4
Czechia 3.9 2.1 6.5 6.2 6.9 6.7 5.9 6.5 5.3 6.2 6.5 5.6
Denmark 3.4 1.6 1.8 3.1 2.6 3.1 4.4 3.9 2.9 4.1 4.1 3.4
Hungary 3.5 1.9 5.9 8.6 17.1 14.9 12.6 8.7 7.8 12.9 7.8 7.1
Poland 5.8 3.0 5.7 4.7 12.3 14.4 12.3 6.2 4.8 11.4 5.9 5.5
Romania 10.9 3.5 11.6 6.4 13.7 18.1 16.6 8.9 6.9 12.8 9.9 8.9
Sweden 3.5 2.6 2.7 4.9 2.1 5.4 4.7 3.7 3.5 4.6 3.2 3.1
EU 2.6 1.7 1.8 4.5 5.1 6.0 5.2 3.7 3.0 4.9 3.5 3.0
United Kingdom 3.1 1.6 2.4 4.3 6.3 6.8 5.1 3.7 2.2 4.6 2.9 2.0
Japan -1.4 0.4 0.6 2.0 1.9 1.5 2.8 2.9 2.1 3.9 2.4 2.4
United States 2.9 2.3 3.7 5.1 2.9 3.6 4.1 4.2 3.3 4.4 3.4 3.1
Note: See note 6 on concepts and sources.

200
 Statistical Annex

Table 26: Real compensation of employees per head ¹ (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.7 0.5 -0.5 2.2 -2.5 1.9 1.3 1.3 0.3 0.9 0.9 0.7
Germany 0.1 1.4 1.1 0.3 -2.3 -0.8 2.4 1.5 0.8 2.0 0.5 0.2
Estonia 4.5 2.0 4.6 4.9 -7.9 -0.5 2.3 0.7 2.2 2.7 0.7 1.6
Ireland 2.6 0.4 2.0 0.0 -4.7 -1.7 -0.7 1.4 1.5 0.6 1.6 1.8
Greece -0.1 -3.8 -1.1 0.6 -3.8 -0.9 2.3 0.7 1.1 1.5 0.8 0.7
Spain 1.6 -1.0 0.5 2.5 -1.5 0.4 0.9 1.0 0.7 1.7 0.9 0.2
France 1.2 1.0 -0.7 3.6 0.0 -2.6 1.2 1.6 0.7 0.5 0.6 0.1
Croatia -0.3 -1.6 1.2 3.3 1.6 6.6 7.8 5.9 3.3 8.2 2.3 1.7
Italy 0.2 -1.0 -0.9 5.2 -2.9 -2.0 2.0 1.7 1.2 2.8 1.2 0.9
Cyprus 0.2 -1.7 1.8 3.2 1.0 1.3 2.7 2.0 1.8 2.2 1.0 1.0
Latvia 3.6 4.7 3.9 4.8 -0.6 6.0 5.4 2.5 2.8 7.9 2.3 1.8
Lithuania 1.8 3.6 5.9 6.8 -5.8 2.7 8.2 4.8 5.9 7.0 4.7 3.7
Luxembourg 1.1 0.7 0.5 3.7 -1.0 -2.1 -1.0 1.3 1.3 0.8 0.7 1.3
Malta 1.3 1.9 2.9 3.8 -0.3 -3.8 2.5 1.8 1.5 1.3 1.8 0.7
Netherlands 0.7 0.1 0.6 -1.6 -3.6 -0.6 3.7 2.7 2.1 3.0 2.1 1.5
Austria 0.6 0.0 0.6 0.8 -2.7 -1.4 5.0 0.3 1.0 3.8 0.7 0.8
Portugal 0.6 -1.7 1.8 3.8 -1.6 3.5 5.3 2.7 1.9 3.7 1.4 1.2
Slovakia 3.7 0.9 3.3 3.6 -5.3 0.1 3.8 0.9 1.6 3.7 1.4 2.6
Slovenia 2.1 -0.2 3.0 4.4 -4.5 1.9 4.0 3.4 2.8 4.9 2.2 2.3
Finland 1.1 -0.2 0.1 1.8 -3.7 -0.8 -1.5 0.3 0.7 -1.0 0.7 0.6
Euro area 0.7 0.4 0.3 2.0 -2.1 -0.9 2.0 1.5 1.0 1.8 0.9 0.5
Bulgaria 6.5 5.1 5.9 5.0 -1.6 4.9 5.2 5.9 3.5 8.2 8.7 5.2
Czechia 1.4 1.0 3.8 1.9 -6.5 -1.3 2.8 4.0 3.2 3.1 3.8 3.3
Denmark 1.3 0.4 1.3 1.0 -4.2 0.2 2.7 2.0 1.3 2.3 2.0 1.7
Hungary -1.0 -0.4 2.8 2.6 2.0 0.5 6.8 4.4 4.3 8.3 4.0 3.8
Poland 3.0 1.5 4.0 -0.8 -1.6 4.5 8.6 2.5 1.7 7.4 1.2 2.6
Romania 3.6 1.1 8.4 1.7 -0.2 7.6 9.8 3.0 2.1 7.2 5.0 4.4
Sweden 1.8 1.7 1.1 2.6 -4.3 -1.1 1.8 1.6 1.8 2.1 1.8 1.5
EU 0.8 0.4 0.7 1.9 -2.2 -0.6 2.3 1.6 1.1 2.2 1.1 0.8
United Kingdom 1.0 -0.1 0.9 1.8 -1.7 0.1 2.0 1.2 0.2 2.2 0.8 0.0
Japan -0.7 0.2 0.3 1.4 -1.0 -1.5 0.5 1.0 0.4 1.3 0.6 0.8
United States 0.9 0.8 2.1 0.9 -3.4 -0.2 1.6 1.5 1.1 1.9 1.4 1.1
¹ Deflated by the price deflator of private consumption.
Note: See note 6 on concepts and sources.

Table 27: Labour productivity (real GDP per occupied person) (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.4 0.6 -0.7 4.4 2.3 0.4 0.7 0.4 0.3 0.8 0.8 1.0
Germany 0.3 0.7 -0.3 3.5 0.0 -1.0 -0.4 0.1 0.9 -0.5 0.5 1.2
Estonia 1.8 1.0 2.1 7.0 -4.3 -6.0 -0.5 1.2 2.0 0.2 1.3 2.0
Ireland 1.5 5.7 4.0 9.1 1.6 -8.7 -1.4 1.6 1.3 -2.8 2.1 1.9
Greece -0.3 -2.4 -2.1 3.4 3.2 1.1 1.0 1.1 1.3 1.0 1.4 1.4
Spain 1.1 1.1 -1.3 4.0 2.6 -0.3 0.9 0.4 0.4 0.6 0.2 0.1
France 0.5 0.7 -1.0 4.2 0.2 -0.1 0.6 0.7 0.9 0.6 0.7 1.0
Croatia 0.0 1.2 0.2 11.3 5.0 1.1 -2.0 0.6 1.8 0.5 1.3 1.7
Italy -0.6 -0.4 -1.5 7.9 2.8 -1.2 -0.9 -0.3 0.6 -0.9 0.2 1.0
Cyprus 0.6 0.2 0.1 8.2 3.0 1.3 1.4 1.7 1.4 1.6 1.5 1.2
Latvia 2.3 2.6 0.9 8.3 1.6 2.7 0.5 0.9 2.4 0.3 1.4 2.5
Lithuania 3.6 2.8 3.0 5.0 -2.3 -1.1 1.0 2.4 2.8 0.3 2.9 3.3
Luxembourg -0.4 -0.3 -1.0 3.9 -4.3 -2.8 -0.1 0.4 0.2 0.3 0.7 0.5
Malta 1.9 2.2 -0.4 10.2 -0.6 0.0 0.8 1.0 1.2 0.7 1.2 1.5
Netherlands 0.4 0.9 -0.5 4.5 1.1 -1.5 -0.1 0.9 1.0 0.0 1.2 1.1
Austria 0.2 0.1 -0.4 2.7 2.6 -1.8 -1.2 -0.4 0.5 -0.8 0.4 0.8
Portugal 1.3 0.3 -0.8 4.1 3.1 1.5 0.3 0.7 1.3 0.6 0.9 1.3
Slovakia 4.3 1.6 0.5 6.3 -1.3 1.9 2.2 1.6 1.5 2.1 2.2 2.4
Slovenia 1.1 0.8 0.4 7.0 -0.2 0.5 1.4 1.4 1.8 1.1 1.8 1.9
Finland 0.3 -0.2 0.6 0.4 -2.7 -1.8 0.4 0.8 0.7 0.3 0.9 0.9
Euro area 0.4 0.6 -0.6 4.7 1.1 -1.0 -0.1 0.3 0.8 -0.2 0.6 1.0
Bulgaria 2.9 2.2 2.0 7.7 3.0 0.8 1.7 1.7 1.8 1.9 2.8 2.9
Czechia 1.9 1.1 1.5 3.0 1.8 -1.1 0.8 1.5 1.8 0.5 1.9 2.5
Denmark 0.1 0.9 0.6 5.0 -2.4 1.1 2.8 3.1 1.9 1.5 2.3 1.4
Hungary 0.7 0.3 1.2 5.3 2.7 -1.1 0.4 0.8 2.2 0.3 1.7 2.7
Poland 2.8 2.4 2.3 3.9 4.1 0.2 3.7 3.2 2.7 3.3 3.4 3.1
Romania 3.8 3.3 3.5 4.8 3.2 4.0 -1.0 0.8 1.5 0.0 1.9 2.2
Sweden 1.0 0.7 0.2 4.6 -2.0 -1.3 1.3 0.9 1.4 0.8 1.3 1.9
EU 0.6 0.8 -0.3 4.7 1.2 -0.7 0.2 0.6 1.0 0.1 0.9 1.3
United Kingdom 0.2 0.6 -1.4 8.6 3.6 -0.8 0.3 0.7 0.9 0.8 0.9 0.8
Japan -0.1 1.1 -1.1 2.8 0.8 1.1 -0.4 0.3 0.4 0.0 1.1 0.9
United States 1.6 0.5 1.5 2.6 -1.2 1.1 2.0 0.9 1.1 2.5 1.8 1.5
Note : See note 6 on concepts and sources.

201
European Economic Forecast, Spring 2025

Table 28: Unit labour costs, whole economy ¹ (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.2 1.4 1.8 0.5 5.1 7.5 2.2 3.2 1.9 2.3 2.1 1.5
Germany 1.2 2.0 2.6 -0.3 4.3 6.9 5.7 3.3 2.0 5.3 2.5 1.6
Estonia 7.5 3.7 4.8 2.1 13.1 15.1 6.1 3.3 1.9 5.7 3.0 2.0
Ireland 0.8 -4.0 -1.0 -5.7 0.9 16.9 5.0 1.8 2.0 7.4 1.7 1.8
Greece 3.1 -1.7 0.8 -1.7 -1.4 2.5 4.9 2.6 2.1 3.1 1.7 1.5
Spain 2.8 -1.1 2.6 0.8 2.3 6.2 4.0 3.0 2.2 4.0 2.9 2.0
France 1.9 1.2 1.2 0.8 4.6 4.3 2.6 1.8 1.1 2.3 1.6 1.0
Croatia 3.0 -1.5 1.6 -4.7 7.0 14.6 13.5 8.2 3.5 10.6 3.5 2.0
Italy 2.6 0.8 1.4 -1.0 0.9 4.2 4.3 3.6 1.9 5.0 2.7 1.5
Cyprus 2.6 -1.5 1.6 -3.4 4.1 3.7 3.1 1.9 1.9 2.8 1.5 1.5
Latvia 7.6 3.6 5.1 -0.7 11.3 12.5 8.5 4.6 2.1 8.9 3.1 1.5
Lithuania 3.5 2.4 5.0 6.5 14.2 13.1 8.0 5.0 4.3 7.7 3.5 2.0
Luxembourg 3.2 2.7 3.0 1.3 9.1 5.4 2.3 3.3 3.1 2.7 2.7 2.8
Malta 1.8 1.4 4.5 -4.8 5.7 2.3 5.0 3.1 2.2 3.6 2.9 1.2
Netherlands 1.9 0.6 3.0 -1.6 2.5 7.9 6.5 4.1 2.7 6.4 3.5 2.5
Austria 2.2 2.0 2.7 0.2 2.2 8.7 9.8 3.6 2.6 8.2 2.7 2.0
Portugal 1.3 -0.9 3.7 1.7 2.4 6.4 7.7 4.1 2.6 5.9 2.6 2.1
Slovakia 2.0 0.9 4.2 0.6 7.3 8.3 5.0 3.3 2.9 4.5 3.5 2.8
Slovenia 3.7 -0.1 3.4 0.9 5.2 9.0 4.7 4.2 2.9 6.0 3.7 2.5
Finland 2.8 2.1 0.2 3.7 5.3 5.3 0.1 1.5 1.5 -0.1 1.8 1.6
Euro area 2.0 1.0 2.0 -0.4 3.4 6.4 4.7 3.0 1.9 4.5 2.4 1.6
Bulgaria 7.6 4.6 5.9 3.3 10.9 12.5 8.5 7.8 4.2 11.5 7.9 5.3
Czechia 2.0 0.9 4.9 3.1 5.0 7.9 5.0 4.9 3.4 5.7 4.4 3.0
Denmark 3.3 0.6 1.2 -1.8 5.0 1.9 1.5 0.8 1.0 2.6 1.8 2.0
Hungary 2.7 1.6 4.6 3.2 14.0 16.2 12.2 7.9 5.5 12.5 6.0 4.3
Poland 2.9 0.6 3.3 0.8 7.9 14.2 8.3 2.9 2.0 7.9 2.4 2.4
Romania 6.8 0.2 7.8 1.6 10.2 13.6 17.8 8.0 5.3 12.9 7.8 6.6
Sweden 2.5 1.9 2.5 0.2 4.2 6.7 3.4 2.8 2.0 3.8 1.9 1.2
EU 2.1 0.9 2.1 -0.2 3.8 6.8 4.9 3.1 2.0 4.8 2.5 1.8
United Kingdom 3.0 1.0 3.9 -3.9 2.7 7.7 4.8 3.0 1.3 3.7 2.0 1.1
Japan -1.3 -0.6 1.8 -0.8 1.1 0.3 3.2 2.6 1.7 3.9 1.3 1.5
United States 1.2 1.8 2.1 2.4 4.1 2.4 2.1 3.3 2.2 1.9 1.6 1.6
¹ Compensation of employees per head divided by labour productivity per head, defined as GDP in volume divided by total employment.
Note: See note 6 on concepts and sources.

Table 29: Real unit labour costs ¹ (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.5 -0.2 0.0 -2.2 -1.6 2.9 0.2 0.3 -0.2 -0.4 -0.3 -0.6
Germany 0.0 0.3 0.9 -3.0 -1.7 0.7 2.5 0.9 -0.2 2.3 0.2 -0.6
Estonia 1.6 0.1 1.6 -3.1 -2.3 6.6 2.2 -0.6 -0.6 0.5 -1.0 -1.3
Ireland 1.6 -6.7 -1.7 -6.8 -5.5 12.9 1.6 -0.9 -0.1 4.0 -0.4 0.1
Greece 0.2 -1.1 0.9 -3.1 -7.4 -3.2 1.7 -0.7 -0.2 -0.3 -0.7 -0.6
Spain 0.7 -1.2 1.5 -1.7 -2.3 0.0 1.0 0.6 0.1 0.9 0.4 0.1
France 0.4 0.3 -0.1 -0.4 1.4 -0.9 0.3 0.0 -0.4 0.1 -0.1 -0.7
Croatia -0.5 -2.2 0.4 -6.6 -1.0 2.6 7.6 3.7 0.8 3.7 0.3 0.0
Italy 0.7 -0.4 0.3 -2.3 -2.5 -1.7 2.1 1.4 0.2 3.3 0.8 -0.3
Cyprus -0.2 -1.6 1.3 -6.2 -2.4 -0.1 -0.4 -0.7 -0.4 -0.7 -0.9 -0.7
Latvia 0.8 1.3 2.3 -3.9 1.3 6.1 5.8 0.6 -0.7 6.2 0.2 -0.6
Lithuania -1.1 0.5 2.4 0.4 -1.6 3.7 4.4 1.4 1.9 3.9 0.1 -0.2
Luxembourg -0.8 -0.1 1.5 -4.3 2.7 -0.9 -2.8 0.8 0.3 -1.2 -0.2 0.0
Malta -0.7 -1.1 2.4 -7.1 0.6 -2.8 1.7 0.5 0.1 1.0 0.4 -0.8
Netherlands 0.3 -0.2 1.0 -4.3 -3.4 0.5 1.2 0.3 0.1 1.3 0.4 0.2
Austria 0.4 0.0 0.9 -1.7 -2.4 1.9 6.5 0.1 0.3 3.8 0.4 0.1
Portugal -0.7 -1.7 1.8 -0.3 -2.8 -0.6 3.1 0.9 0.3 2.1 0.1 -0.1
Slovakia 0.7 0.2 2.6 -1.6 -0.2 -1.7 1.3 -0.6 -0.4 0.0 -0.3 0.0
Slovenia 1.1 -1.0 1.8 -1.7 -1.2 -1.0 1.6 1.4 0.2 2.9 0.0 -0.3
Finland 1.0 -0.1 -1.0 1.2 -0.8 1.8 -1.3 -0.3 -0.2 -1.5 -0.3 -0.4
Euro area 0.3 -0.2 0.6 -2.4 -1.6 0.4 1.7 0.5 -0.1 1.6 0.1 -0.4
Bulgaria 1.5 2.2 1.4 -3.4 -4.3 4.2 1.9 2.3 1.7 6.4 5.4 2.5
Czechia 0.3 -0.4 2.0 -0.9 -3.4 -0.2 1.0 1.9 0.6 1.6 2.0 0.6
Denmark 0.8 -0.4 0.1 -4.5 -3.7 6.0 -0.3 -0.9 -0.9 1.0 -0.4 0.1
Hungary -1.3 -1.2 0.3 -2.8 -0.1 0.8 4.6 2.9 1.8 5.0 1.9 1.0
Poland -0.1 -0.8 1.3 -4.3 -2.5 3.9 4.6 -1.3 -1.0 3.8 -2.2 -0.5
Romania -3.2 -2.5 2.7 -3.8 -1.7 0.7 8.3 1.4 -0.5 3.5 1.8 1.2
Sweden 0.2 0.5 0.4 -2.4 -1.5 0.6 0.6 1.1 0.3 1.4 0.4 -0.1
EU 0.2 -0.3 0.5 -2.6 -1.9 0.6 1.7 0.4 -0.1 1.7 0.1 -0.4
United Kingdom 0.6 -0.5 1.3 -4.0 -2.6 0.7 0.7 -0.1 -0.6 1.0 0.0 -0.7
Japan -0.3 -0.8 1.4 -0.6 0.7 -3.6 0.3 0.5 -0.2 1.1 -0.3 0.2
United States -0.6 0.0 0.4 -2.1 -2.8 -1.1 -0.3 0.5 0.0 -0.5 -0.5 -0.4
¹ Nominal unit labour costs divided by GDP price deflator.
Note: See note 6 on concepts and sources.

202
 Statistical Annex

Table 30: Nominal bilateral exchange rates against ecu/euro (2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium : : : : : : : : : : : :
Germany : : : : : : : : : : : :
Estonia : : : : : : : : : : : :
Ireland : : : : : : : : : : : :
Greece : : : : : : : : : : : :
Spain : : : : : : : : : : : :
France : : : : : : : : : : : :
Croatia : : : : : : : : : : : :
Italy : : : : : : : : : : : :
Cyprus : : : : : : : : : : : :
Latvia : : : : : : : : : : : :
Lithuania : : : : : : : : : : : :
Luxembourg : : : : : : : : : : : :
Malta : : : : : : : : : : : :
Netherlands : : : : : : : : : : : :
Austria : : : : : : : : : : : :
Portugal : : : : : : : : : : : :
Slovakia : : : : : : : : : : : :
Slovenia : : : : : : : : : : : :
Finland : : : : : : : : : : : :
Euro area : : : : : : : : : : : :
Bulgaria 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Czechia 26.5 26.1 26.2 25.6 24.6 24.0 25.1 25.1 25.0 25.1 25.3 25.3
Denmark 7.5 7.5 7.5 7.4 7.4 7.5 7.5 7.5 7.5 7.5 7.5 7.5
Hungary 264.4 296.5 322.9 358.5 390.8 381.8 395.3 407.3 408.1 393.7 401.3 401.3
Poland 3.9 4.2 4.3 4.6 4.7 4.5 4.3 4.3 4.3 4.3 4.3 4.3
Romania 3.8 4.4 4.7 4.9 4.9 4.9 5.0 5.0 5.0 5.0 5.0 5.0
Sweden 9.7 9.0 10.1 10.1 10.6 11.5 11.4 11.1 11.0 11.4 11.4 11.4
EU : : : : : : :
: : : : : :
United Kingdom 0.8 0.8 0.9 0.9 0.9 0.9 0.8 0.9 0.9 0.8 0.8 0.8
Japan 140.7 123.0 124.1 129.9 137.9 151.8 163.9 161.6 162.0 163.9 163.3 163.3
United States 1.4 1.3 1.1 1.2 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1

Table 31: Nominal effective exchange rates to rest of a group ¹ of industrialised countries (percentage change on preceding year, 2006-2026)
30.04.2025

5-year Spring 2025 Autumn 2024

averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.4 -0.3 1.4 0.5 -1.5 2.9 1.1 1.3 0.5 1.2 0.1 0.0
Germany 0.4 -0.4 1.7 0.7 -2.4 3.4 1.3 1.7 0.7 1.4 0.1 0.0
Estonia 0.7 1.3 1.5 0.5 -2.1 4.1 1.2 0.7 0.4 1.3 0.4 0.0
Ireland 0.9 -1.3 1.3 0.9 -4.5 3.0 0.7 1.9 1.0 0.9 -0.1 0.0
Greece 0.7 0.7 2.4 1.5 0.4 4.9 2.6 1.9 0.6 2.8 0.4 0.0
Spain 0.5 -0.2 1.6 0.6 -1.4 3.0 1.3 1.5 0.6 1.4 0.2 0.0
France 0.4 -0.5 1.5 0.7 -2.0 3.3 1.3 1.6 0.7 1.4 0.1 0.0
Croatia 0.7 0.0 1.7 1.3 -0.8 3.6 1.8 0.9 0.3 1.9 0.4 0.0
Italy 0.4 -0.2 1.6 0.9 -2.0 3.3 1.4 1.7 0.7 1.6 0.2 0.0
Cyprus 0.4 -0.6 1.9 0.4 -2.7 5.3 2.0 2.2 0.8 2.2 0.2 0.0
Latvia 0.4 2.0 1.8 0.9 -2.4 4.6 1.4 0.7 0.4 1.5 0.4 0.0
Lithuania 0.9 2.4 1.9 1.1 -2.8 4.4 1.4 0.9 0.5 1.5 0.4 0.0
Luxembourg 0.4 -0.2 1.0 0.5 -1.1 2.2 0.9 1.0 0.4 1.0 0.2 0.0
Malta 0.2 -0.6 1.2 0.9 -1.5 4.0 1.7 1.7 0.7 1.8 0.1 0.0
Netherlands 0.5 -0.3 1.3 0.4 -1.4 2.7 0.9 1.2 0.5 1.0 0.1 0.0
Austria 2.2 -2.1 -0.9 4.9 -0.3 -0.8 9.1 1.2 0.5 1.0 0.1 0.0
Portugal 0.3 -0.3 1.2 0.5 -1.3 2.4 1.0 1.2 0.5 1.1 0.2 0.0
Slovakia 5.5 0.3 1.1 0.5 -1.0 2.0 0.9 0.9 0.4 0.9 0.2 0.0
Slovenia 0.4 0.7 1.1 0.7 -1.3 2.1 0.8 0.7 0.3 0.9 0.1 0.0
Finland 0.6 0.5 1.6 0.6 -2.3 4.1 1.3 1.4 0.6 1.4 0.2 0.0
Euro area 1.0 -0.6 2.7 1.2 -3.3 5.5 2.1 2.8 1.1 2.3 0.2 0.0
Bulgaria 0.8 0.9 2.5 1.8 0.9 4.8 2.7 1.7 0.5 2.8 0.4 0.0
Czechia 3.8 -1.3 1.8 3.9 3.6 4.6 -3.8 1.1 0.4 -3.7 -0.3 0.0
Denmark 0.5 -0.3 1.6 0.4 -2.0 3.8 1.0 1.3 0.6 1.1 0.2 0.0
Hungary -1.6 -2.0 -1.3 -1.4 -9.2 5.0 -2.4 -2.1 0.2 -1.9 -1.7 0.0
Poland 1.0 -0.4 0.1 -2.4 -3.9 6.0 6.8 2.0 -0.1 6.8 0.0 0.0
Romania -2.2 -0.4 -0.1 -0.6 0.0 3.1 1.2 1.2 0.4 1.3 0.3 0.0
Sweden 0.0 0.4 -0.7 3.5 -6.6 -3.9 1.5 4.9 1.1 1.9 0.3 0.0
EU 1.1 -0.8 3.0 1.5 -4.7 7.0 3.0 3.7 1.4 3.2 0.2 0.0
United Kingdom -4.3 2.8 -2.6 4.6 -2.2 1.9 4.4 : : 4.5 1.8 0.0
Japan 4.0 -4.8 4.0 -6.3 -11.7 -4.6 -5.8 5.3 1.2 -5.8 0.3 0.0
United States -1.4 3.8 2.0 -4.0 7.0 0.5 2.3 1.6 -0.9 1.9 1.5 0.0
1) 42 countries: EU-27, TR, CH, NO, US, UK, CA, JP, AU, MX, NZ, KO, CN, HK, RU and BR.

203
European Economic Forecast, Spring 2025

Table 32: Total expenditure, general government (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 51.3 55.3 53.7 54.9 52.3 53.3 54.5 55.5 55.6 53.8 53.8 54.0
Germany 45.9 44.9 46.1 50.7 49.0 48.4 49.5 50.2 50.5 48.9 49.1 48.9
Estonia 38.7 38.4 40.1 42.1 40.0 43.7 44.0 45.2 45.3 44.8 46.3 46.5
Ireland 44.5 38.7 25.6 23.5 20.6 22.7 23.5 23.6 23.9 24.0 24.2 24.2
Greece 50.6 56.6 50.9 56.7 52.8 49.5 48.0 47.5 47.6 48.7 47.5 47.6
Spain 42.2 46.0 43.6 49.5 46.4 45.4 45.4 45.6 45.6 45.4 45.4 45.5
France 55.5 57.9 57.7 59.5 58.4 56.9 57.1 57.6 57.5 57.5 57.4 57.3
Croatia 46.9 48.0 47.0 48.1 45.0 46.8 48.0 49.1 49.2 47.6 48.4 48.4
Italy 48.6 50.3 50.3 56.0 54.9 54.0 50.6 51.0 50.8 50.7 51.1 50.6
Cyprus 42.3 48.2 41.7 42.7 38.1 42.0 40.0 41.2 41.0 40.2 40.4 39.8
Latvia 41.7 40.9 40.6 46.5 44.2 43.7 45.7 47.6 47.5 46.2 47.8 47.7
Lithuania 39.1 36.5 35.7 37.3 36.3 37.4 39.5 41.6 41.9 39.6 40.3 40.4
Luxembourg 39.9 41.1 42.8 42.4 44.3 47.0 46.9 48.0 48.2 48.7 48.8 48.6
Malta 41.4 40.1 35.9 39.5 37.7 36.7 38.3 36.3 36.0 36.9 35.7 35.6
Netherlands 45.8 47.0 43.8 45.9 43.2 43.2 43.9 44.3 45.2 43.4 44.5 45.0
Austria 51.8 51.8 51.2 56.0 53.1 52.7 56.3 56.4 56.3 54.3 54.4 54.1
Portugal 47.5 49.8 45.0 47.3 43.9 42.3 42.8 44.0 45.0 42.9 42.9 43.0
Slovakia 39.0 41.6 41.1 44.9 43.0 48.0 47.1 48.5 49.1 47.2 48.2 47.4
Slovenia 47.0 51.8 46.2 49.9 47.7 46.5 46.8 47.8 48.3 47.7 47.4 47.8
Finland 50.1 56.0 53.9 55.1 52.6 55.9 57.6 57.5 57.2 57.1 56.9 56.2
Euro area 48.4 49.7 48.6 52.0 50.0 49.5 49.6 50.0 50.2 49.5 49.6 49.4
Bulgaria 36.8 37.9 36.9 41.5 41.3 38.8 39.8 41.6 41.2 40.5 41.3 41.6
Czechia 42.1 42.7 40.9 45.0 43.0 43.9 43.0 43.1 42.5 43.3 43.0 42.2
Denmark 52.5 55.9 51.4 49.4 44.9 46.8 46.5 47.8 48.4 47.9 48.3 48.8
Hungary 49.9 49.8 47.2 48.1 48.7 49.2 46.9 47.1 46.8 48.0 47.5 47.2
Poland 44.4 42.9 42.5 43.6 43.2 46.9 49.4 50.2 50.6 49.6 49.5 49.5
Romania 38.0 36.2 36.0 39.8 40.7 40.6 43.5 43.2 42.9 42.9 43.4 43.4
Sweden 50.9 51.2 50.8 50.0 48.9 49.4 50.0 49.5 48.8 50.8 49.9 48.8
EU 48.2 49.3 48.1 51.1 49.2 49.0 49.2 49.6 49.7 49.2 49.3 49.1
United Kingdom 43.7 44.1 43.1 47.9 46.1 46.8 46.4 46.9 46.9 46.6 46.7 46.6
Japan 36.9 39.9 40.0 44.0 43.3 40.6 40.8 41.3 41.5 42.9 42.3 42.0
United States 40.0 39.3 39.8 45.3 38.4 39.1 39.2 39.6 39.5 39.9 39.8 39.6

Table 33: Total revenue, general government (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 49.2 51.8 50.6 49.5 48.6 49.2 50.0 50.1 50.0 49.2 48.9 48.7
Germany 44.0 45.1 46.4 47.5 46.9 45.9 46.8 47.5 47.6 46.8 47.2 47.2
Estonia 38.7 38.7 38.7 39.5 38.9 40.5 42.5 43.8 42.8 41.7 43.2 43.5
Ireland 34.5 31.9 24.5 22.2 22.3 24.3 27.8 24.3 24.0 28.4 25.7 25.5
Greece 40.6 48.0 49.5 49.7 50.4 48.2 49.3 48.1 49.0 48.1 47.4 47.8
Spain 37.9 38.0 39.0 42.8 41.8 41.9 42.3 42.8 43.1 42.4 42.8 42.9
France 50.7 53.1 53.5 52.9 53.7 51.5 51.3 52.0 51.8 51.3 52.1 51.9
Croatia 42.9 42.6 45.5 45.5 45.1 46.0 45.6 46.4 46.6 45.4 46.3 46.4
Italy 45.2 47.3 46.7 47.2 46.8 46.7 47.1 47.7 47.9 46.9 47.7 47.7
Cyprus 40.7 40.9 40.7 41.1 40.8 43.7 44.3 44.7 44.4 43.8 43.2 42.5
Latvia 36.8 38.8 39.4 39.3 39.4 41.3 43.9 44.4 44.4 43.4 44.6 44.4
Lithuania 35.1 33.7 34.7 36.2 35.5 36.7 38.2 39.3 39.5 37.6 37.9 37.8
Luxembourg 41.7 42.0 44.0 43.4 44.5 46.2 47.9 47.5 47.6 48.1 48.0 48.0
Malta 38.6 38.0 35.6 32.5 32.5 32.0 34.6 33.1 33.2 32.9 32.1 32.5
Netherlands 43.6 44.0 44.0 43.7 43.3 42.8 43.0 42.1 42.4 43.2 42.6 42.6
Austria 48.7 50.0 49.3 50.3 49.7 50.1 51.6 52.0 52.1 50.7 50.7 50.6
Portugal 41.0 43.6 42.8 44.5 43.6 43.5 43.5 44.2 44.4 43.5 43.4 43.3
Slovakia 34.2 38.1 38.9 39.8 41.3 42.8 41.8 43.6 44.0 41.4 43.4 43.3
Slovenia 44.2 45.9 44.6 45.3 44.6 43.9 45.8 46.5 46.8 45.3 45.4 45.7
Finland 51.8 53.8 52.0 52.5 52.5 53.0 53.2 53.8 53.7 53.4 53.9 53.7
Euro area 44.9 46.5 46.5 46.9 46.5 46.0 46.5 46.8 46.9 46.5 46.7 46.6
Bulgaria 36.0 35.8 37.3 37.5 38.3 36.8 36.7 38.8 38.4 37.8 38.5 38.8
Czechia 39.2 40.6 40.4 40.1 39.9 40.2 40.8 40.8 40.3 40.7 40.7 40.3
Denmark 54.2 54.8 52.9 53.5 48.3 50.1 51.0 49.3 49.0 50.2 49.7 49.7
Hungary 44.5 46.8 44.1 41.0 42.5 42.4 42.0 42.5 42.1 42.6 43.0 43.2
Poland 39.7 39.1 40.1 41.8 39.8 41.6 42.8 43.8 44.4 43.8 44.0 44.1
Romania 32.6 33.6 31.8 32.6 34.3 34.0 34.1 34.6 34.5 34.8 35.4 35.4
Sweden 52.2 50.1 50.8 49.8 49.9 48.6 48.5 47.9 48.0 48.8 48.5 48.5
EU 44.9 46.3 46.2 46.5 46.0 45.5 46.0 46.3 46.4 46.1 46.3 46.2
United Kingdom 38.4 38.3 38.8 40.5 41.9 41.1 40.7 41.6 42.4 41.5 42.3 42.7
Japan 31.1 33.1 35.7 37.9 39.1 38.3 38.3 38.5 38.5 36.8 36.9 37.1
United States 31.9 32.2 32.3 33.4 34.7 31.6 31.7 32.9 33.7 32.1 32.4 32.7

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 Statistical Annex

Table 34: Net lending (+) or net borrowing (-), general government (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium -2.1 -3.5 -3.1 -5.4 -3.6 -4.1 -4.5 -5.4 -5.5 -4.6 -4.9 -5.3
Germany -1.9 0.2 0.3 -3.2 -2.1 -2.5 -2.8 -2.7 -2.9 -2.2 -2.0 -1.8
Estonia -0.1 0.2 -1.3 -2.6 -1.1 -3.1 -1.5 -1.4 -2.4 -3.0 -3.0 -3.0
Ireland -10.0 -6.7 -1.1 -1.4 1.7 1.5 4.3 0.7 0.1 4.4 1.4 1.3
Greece -10.0 -8.6 -1.4 -7.1 -2.5 -1.4 1.3 0.7 1.4 -0.6 -0.1 0.2
Spain -4.3 -8.0 -4.6 -6.7 -4.6 -3.5 -3.2 -2.8 -2.5 -3.0 -2.6 -2.7
France -4.7 -4.8 -4.2 -6.6 -4.7 -5.4 -5.8 -5.6 -5.7 -6.2 -5.3 -5.4
Croatia -4.0 -5.4 -1.5 -2.6 0.1 -0.8 -2.4 -2.7 -2.6 -2.1 -2.1 -1.9
Italy -3.3 -2.9 -3.6 -8.9 -8.1 -7.2 -3.4 -3.3 -2.9 -3.8 -3.4 -2.9
Cyprus -1.6 -7.3 -1.1 -1.6 2.7 1.7 4.3 3.5 3.4 3.5 2.7 2.7
Latvia -4.8 -2.1 -1.2 -7.2 -4.9 -2.4 -1.8 -3.1 -3.1 -2.8 -3.2 -3.2
Lithuania -4.0 -2.9 -1.0 -1.2 -0.7 -0.7 -1.3 -2.3 -2.3 -2.0 -2.4 -2.6
Luxembourg 1.8 0.9 1.2 1.0 0.2 -0.8 1.0 -0.4 -0.5 -0.6 -0.8 -0.6
Malta -2.8 -2.2 -0.3 -7.0 -5.2 -4.7 -3.7 -3.2 -2.8 -4.0 -3.5 -3.1
Netherlands -2.1 -3.0 0.2 -2.2 0.0 -0.4 -0.9 -2.1 -2.7 -0.2 -1.9 -2.4
Austria -3.1 -1.8 -1.9 -5.7 -3.4 -2.6 -4.7 -4.4 -4.2 -3.6 -3.7 -3.5
Portugal -6.4 -6.2 -2.2 -2.8 -0.3 1.2 0.7 0.1 -0.6 0.6 0.4 0.3
Slovakia -4.8 -3.5 -2.2 -5.1 -1.7 -5.2 -5.3 -4.9 -5.1 -5.8 -4.7 -4.1
Slovenia -2.8 -5.9 -1.6 -4.6 -3.0 -2.6 -0.9 -1.3 -1.5 -2.4 -2.1 -2.1
Finland 1.6 -2.2 -1.9 -2.7 -0.2 -3.0 -4.4 -3.7 -3.4 -3.7 -3.0 -2.5
Euro area -3.4 -3.2 -2.1 -5.1 -3.5 -3.5 -3.1 -3.2 -3.3 -3.0 -2.9 -2.8
Bulgaria -0.8 -2.1 0.4 -4.0 -3.0 -2.0 -3.0 -2.8 -2.8 -2.6 -2.8 -2.8
Czechia -2.9 -2.1 -0.5 -5.0 -3.1 -3.8 -2.2 -2.3 -2.2 -2.5 -2.3 -1.9
Denmark 1.8 -1.1 1.5 4.1 3.4 3.3 4.5 1.5 0.6 2.3 1.5 0.9
Hungary -5.5 -3.0 -3.2 -7.1 -6.2 -6.7 -4.9 -4.6 -4.7 -5.4 -4.6 -4.1
Poland -4.7 -3.9 -2.3 -1.7 -3.4 -5.3 -6.6 -6.4 -6.1 -5.8 -5.6 -5.3
Romania -5.4 -2.7 -4.3 -7.1 -6.4 -6.6 -9.3 -8.6 -8.4 -8.0 -7.9 -7.9
Sweden 1.3 -1.1 0.0 -0.2 1.0 -0.8 -1.5 -1.5 -0.8 -1.9 -1.4 -0.3
EU -3.2 -3.0 -2.0 -4.6 -3.2 -3.5 -3.2 -3.3 -3.4 -3.1 -3.0 -2.9
United Kingdom -6.1 -6.2 -4.7 -7.8 -4.6 -6.0 -6.0 -5.3 -4.4 -5.1 -4.4 -3.9
Japan -5.8 -6.8 -4.3 -6.1 -4.2 -2.3 -2.5 -2.8 -3.0 -6.1 -5.4 -4.9
United States -8.0 -7.2 -7.5 -11.8 -3.7 -7.6 -7.5 -6.7 -5.8 -7.8 -7.4 -6.9

Table 35: Interest expenditure, general government (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 4.0 3.4 2.3 1.7 1.6 2.0 2.3 2.4 2.5 2.2 2.3 2.4
Germany 2.6 1.9 0.9 0.6 0.7 0.9 1.1 1.1 1.1 1.0 1.1 1.1
Estonia 0.2 0.1 0.0 0.1 0.1 0.4 0.6 0.5 0.6 0.7 0.7 0.7
Ireland 1.6 3.6 1.6 0.7 0.6 0.7 0.6 0.6 0.6 0.6 0.6 0.6
Greece 5.0 5.0 3.1 2.5 2.5 3.4 3.5 3.1 3.0 3.5 2.9 3.0
Spain 1.7 3.1 2.4 2.1 2.3 2.4 2.4 2.6 2.6 2.5 2.5 2.6
France 2.7 2.4 1.7 1.4 1.9 1.9 2.1 2.5 2.9 2.2 2.5 2.8
Croatia 1.9 3.1 2.4 1.5 1.4 1.7 1.5 1.5 1.5 1.5 1.5 1.5
Italy 4.5 4.6 3.6 3.4 4.1 3.7 3.9 3.9 4.0 3.9 3.9 4.0
Cyprus 2.5 3.0 2.3 1.7 1.3 1.3 1.2 1.2 1.2 1.2 1.1 1.0
Latvia 1.0 1.6 0.9 0.5 0.5 0.7 1.1 1.3 1.4 1.1 1.3 1.4
Lithuania 1.0 1.8 1.0 0.5 0.3 0.6 0.8 1.0 1.2 0.8 0.9 1.1
Luxembourg 0.3 0.5 0.3 0.1 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.4
Malta 3.3 2.7 1.5 1.0 0.9 1.1 1.2 1.3 1.3 1.2 1.3 1.4
Netherlands 2.1 1.6 0.9 0.5 0.6 0.7 0.7 0.8 0.8 0.8 0.8 0.8
Austria 3.1 2.6 1.7 1.1 1.0 1.2 1.5 1.7 1.8 1.5 1.5 1.5
Portugal 3.0 4.6 3.4 2.4 1.9 2.1 2.1 2.1 2.2 2.1 2.1 2.1
Slovakia 1.4 1.8 1.4 1.1 1.0 1.2 1.4 1.6 1.6 1.4 1.5 1.6
Slovenia 1.4 2.6 2.2 1.2 1.1 1.2 1.3 1.3 1.3 1.4 1.4 1.4
Finland 1.4 1.4 0.9 0.5 0.6 1.2 1.6 1.5 1.7 1.3 1.5 1.6
Euro area 2.9 2.8 1.8 1.4 1.7 1.7 1.9 2.0 2.1 1.9 2.0 2.1
Bulgaria 0.9 0.8 0.7 0.5 0.4 0.5 0.5 0.6 0.7 0.6 0.6 0.5
Czechia 1.1 1.3 0.8 0.7 1.1 1.3 1.3 1.3 1.3 1.4 1.3 1.3
Denmark 1.6 1.5 0.8 0.5 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.5
Hungary 4.1 4.1 2.5 2.2 2.8 4.7 5.0 4.2 4.0 4.9 4.0 4.0
Poland 2.3 2.3 1.5 1.1 1.5 2.1 2.2 2.5 2.7 2.3 2.6 2.6
Romania 1.2 1.8 1.1 1.3 1.4 1.9 2.3 2.6 2.8 2.0 2.1 2.2
Sweden 1.5 0.9 0.4 0.2 0.5 0.7 0.6 0.7 0.6 0.7 0.6 0.5
EU 2.7 2.6 1.7 1.4 1.6 1.7 1.9 2.0 2.1 1.9 2.0 2.0
United Kingdom 2.5 3.0 2.5 2.9 4.4 3.3 3.0 3.1 3.2 2.9 2.9 2.9
Japan 1.9 1.9 1.6 1.4 1.4 1.3 1.3 1.3 1.4 1.4 1.4 1.4
United States 4.1 4.0 3.9 3.5 3.7 4.3 4.6 4.8 4.9 4.7 4.8 4.7

205
European Economic Forecast, Spring 2025

Table 36: Primary balance, general government ¹ (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.9 -0.2 -0.8 -3.7 -2.0 -2.1 -2.3 -3.0 -3.0 -2.4 -2.6 -2.9
Germany 0.7 2.1 1.2 -2.6 -1.4 -1.6 -1.7 -1.6 -1.7 -1.1 -0.9 -0.7
Estonia 0.1 0.3 -1.3 -2.5 -1.0 -2.8 -0.9 -0.8 -1.8 -2.4 -2.4 -2.3
Ireland -8.4 -3.1 0.5 -0.6 2.3 2.2 4.9 1.3 0.6 5.1 2.0 1.8
Greece -5.0 -3.6 1.7 -4.6 0.0 2.0 4.8 3.8 4.4 2.9 2.9 3.2
Spain -2.6 -4.9 -2.1 -4.5 -2.3 -1.1 -0.7 -0.2 0.1 -0.5 -0.1 -0.1
France -2.1 -2.4 -2.5 -5.2 -2.8 -3.5 -3.7 -3.1 -2.8 -4.1 -2.7 -2.5
Croatia -2.1 -2.3 0.9 -1.0 1.5 0.9 -0.8 -1.2 -1.1 -0.6 -0.6 -0.5
Italy 1.2 1.7 0.0 -5.5 -4.0 -3.6 0.4 0.6 1.1 0.1 0.5 1.1
Cyprus 1.0 -4.2 1.3 0.1 4.0 3.0 5.5 4.7 4.6 4.7 3.8 3.7
Latvia -3.9 -0.5 -0.3 -6.7 -4.4 -1.6 -0.7 -1.8 -1.7 -1.7 -1.9 -1.8
Lithuania -3.0 -1.1 0.0 -0.7 -0.4 -0.1 -0.5 -1.3 -1.2 -1.3 -1.4 -1.4
Luxembourg 2.1 1.4 1.5 1.1 0.3 -0.5 1.3 -0.1 -0.2 -0.2 -0.4 -0.2
Malta 0.6 0.6 1.2 -6.0 -4.3 -3.7 -2.5 -1.9 -1.5 -2.8 -2.2 -1.7
Netherlands -0.1 -1.4 1.2 -1.7 0.6 0.3 -0.2 -1.4 -2.0 0.6 -1.1 -1.6
Austria 0.0 0.8 -0.3 -4.6 -2.5 -1.4 -3.2 -2.7 -2.4 -2.1 -2.2 -2.0
Portugal -3.5 -1.6 1.2 -0.5 1.6 3.3 2.8 2.3 1.7 2.6 2.5 2.5
Slovakia -3.4 -1.7 -0.8 -4.0 -0.6 -4.0 -3.9 -3.3 -3.5 -4.4 -3.3 -2.5
Slovenia -1.5 -3.3 0.6 -3.4 -1.9 -1.3 0.4 -0.1 -0.2 -1.0 -0.7 -0.7
Finland 3.1 -0.8 -1.0 -2.1 0.4 -1.8 -2.8 -2.2 -1.7 -2.5 -1.5 -1.0
Euro area -0.6 -0.4 -0.3 -3.7 -1.8 -1.8 -1.2 -1.2 -1.1 -1.1 -0.9 -0.7
Bulgaria 0.1 -1.3 1.1 -3.5 -2.6 -1.5 -2.5 -2.2 -2.1 -2.0 -2.2 -2.3
Czechia -1.8 -0.9 0.3 -4.2 -2.0 -2.5 -0.9 -1.0 -0.9 -1.1 -0.9 -0.6
Denmark 3.4 0.4 2.3 4.6 4.2 4.0 5.2 2.2 1.3 3.0 2.0 1.5
Hungary -1.4 1.1 -0.6 -4.9 -3.3 -2.1 0.0 -0.4 -0.7 -0.4 -0.6 -0.1
Poland -2.4 -1.6 -0.9 -0.7 -1.9 -3.2 -4.4 -3.8 -3.4 -3.5 -3.0 -2.8
Romania -4.2 -0.9 -3.1 -5.8 -5.1 -4.7 -7.0 -6.0 -5.6 -6.0 -5.8 -5.8
Sweden 2.8 -0.2 0.4 0.0 1.5 -0.1 -0.9 -0.8 -0.2 -1.3 -0.8 0.2
EU -0.5 -0.4 -0.3 -3.3 -1.6 -1.7 -1.3 -1.3 -1.3 -1.2 -1.0 -0.9
United Kingdom -3.6 -3.2 -2.2 -4.9 -0.2 -2.7 -3.0 -2.2 -1.3 -2.2 -1.5 -1.0
Japan -3.9 -4.9 -2.7 -4.7 -2.8 -1.0 -1.2 -1.5 -1.6 -4.7 -4.1 -3.5
United States -4.0 -3.1 -3.6 -8.3 0.0 -3.2 -2.9 -1.9 -0.9 -3.0 -2.6 -2.2
¹ Net lending/borrowing excluding interest expenditure.

Table 37: Cyclically-adjusted primary balance, general government¹ (as a percentage of potential GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 1.4 0.2 -0.2 -3.1 -2.8 -2.3 -2.1 -2.5 -2.2 -2.2 -2.2 -2.6
Germany 1.0 2.1 1.0 -2.4 -1.6 -1.3 -1.0 -0.7 -1.3 -0.3 -0.2 -0.4
Estonia -0.1 0.5 -1.8 -3.0 -1.0 -0.9 1.2 0.8 -1.1 -0.1 -0.5 -1.5
Ireland -8.5 -3.4 1.8 -3.4 -2.8 2.1 5.5 1.6 1.0 6.2 2.7 2.0
Greece -4.7 4.9 7.3 -1.5 0.5 1.6 3.9 2.5 3.0 2.0 1.7 1.9
Spain -2.4 -0.3 -1.1 -2.1 -2.3 -1.5 -1.6 -1.2 -0.8 -1.2 -0.8 -0.7
France -2.2 -1.5 -1.9 -4.4 -2.9 -3.5 -3.7 -2.8 -2.7 -4.0 -2.5 -2.6
Croatia -3.5 -0.6 1.3 -1.0 0.0 -0.3 -1.8 -1.8 -1.4 -1.5 -1.3 -1.0
Italy 0.8 3.7 1.6 -4.6 -5.0 -4.4 -0.1 0.3 0.7 -0.2 0.2 0.6
Cyprus -0.5 -1.3 1.4 -0.9 1.6 1.4 4.1 3.6 3.8 3.4 2.8 3.1
Latvia -4.1 0.1 -0.6 -6.6 -4.3 -1.9 -0.5 -1.3 -1.4 -1.5 -1.6 -1.6
Lithuania -3.0 -0.4 -0.8 -1.4 -0.7 0.6 0.2 -0.6 -0.8 -0.4 -0.7 -1.1
Luxembourg 1.7 2.3 1.9 0.5 1.0 1.1 3.0 1.3 0.9 1.5 1.1 1.1
Malta 0.5 0.7 1.0 -6.0 -3.6 -3.3 -2.4 -1.7 -1.0 -2.7 -1.8 -1.2
Netherlands 0.0 -0.2 1.5 -1.3 -0.8 0.2 0.2 -0.8 -1.2 1.1 -0.5 -0.9
Austria 0.0 1.2 -0.1 -3.6 -3.8 -1.6 -2.5 -1.7 -1.8 -1.3 -1.6 -1.7
Portugal -3.3 0.0 1.4 1.4 1.0 2.7 2.4 2.1 1.4 2.4 2.5 2.3
Slovakia -4.3 -1.0 -0.9 -4.6 -0.9 -4.2 -3.8 -3.0 -3.0 -4.1 -3.0 -2.3
Slovenia -3.0 -0.5 0.6 -4.5 -3.2 -2.3 -0.2 -0.5 -0.8 -1.6 -1.3 -1.3
Finland 2.7 0.4 -0.9 -2.0 0.7 -0.5 -1.1 -0.8 -0.7 -0.6 -0.1 -0.2
Euro area -0.6 0.9 0.3 -3.0 -2.4 -1.9 -1.1 -0.9 -1.0 -0.8 -0.7 -0.7
Bulgaria -0.3 -1.2 1.3 -3.6 -3.2 -1.8 -2.7 -2.1 -2.0 -2.1 -2.3 -2.5
Czechia -2.8 0.0 -0.1 -3.9 -2.2 -1.9 -0.2 -0.5 -0.7 -0.3 -0.4 -0.4
Denmark 3.1 2.2 3.2 4.8 5.2 5.1 5.7 2.0 1.1 3.4 2.1 1.5
Hungary -0.7 2.4 -1.4 -5.2 -4.4 -1.9 0.5 0.2 -0.7 0.2 -0.1 -0.2
Poland -3.3 -1.2 -1.0 -0.9 -2.7 -2.6 -4.0 -3.7 -3.4 -3.0 -2.8 -2.8
Romania -4.8 -0.3 -2.9 -5.0 -5.0 -4.5 -6.4 -5.4 -5.1 -5.4 -5.2 -5.4
Sweden 2.8 0.4 0.6 -0.2 1.4 0.7 0.1 0.2 0.6 0.0 0.2 0.6
EU -0.6 0.8 0.3 -2.7 -2.2 -1.7 -1.1 -1.1 -1.1 -0.9 -0.8 -0.8
¹ Cyclically-adjusted variables for Croatia are based on provisional values for fiscal semi-elasticities and subject to further revisions

206
 Statistical Annex

Table 38: Structural budget balance, general government¹ (as a percentage of potential GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium : : -2.7 -4.6 -4.4 -4.1 -4.2 -4.8 -4.7 -4.2 -4.4 -4.9
Germany : : 0.2 -2.8 -2.1 -2.1 -2.1 -1.8 -2.4 -1.4 -1.3 -1.5
Estonia : : -1.8 -4.0 -1.3 -1.2 0.6 0.3 -1.7 -0.8 -1.2 -2.2
Ireland : : 0.2 -4.2 -3.5 1.5 2.3 1.0 0.4 2.9 2.1 1.5
Greece : : 3.8 -4.8 -2.5 -1.6 0.6 -0.5 -0.1 -1.3 -1.2 -1.1
Spain : : -3.2 -4.2 -4.6 -3.8 -3.2 -3.2 -3.2 -3.6 -3.2 -3.1
France : : -3.3 -5.7 -4.8 -5.3 -5.7 -5.2 -5.6 -6.1 -5.0 -5.4
Croatia : : -1.1 -2.6 -1.1 -1.9 -3.3 -3.3 -2.9 -3.0 -2.8 -2.4
Italy : : -2.1 -8.4 -9.4 -8.4 -4.1 -3.7 -3.4 -4.3 -3.8 -3.6
Cyprus : : 0.9 -2.6 0.3 0.1 2.9 2.4 2.6 2.2 1.8 2.1
Latvia : : -1.6 -7.3 -4.8 -2.6 -1.6 -2.6 -2.9 -2.6 -2.8 -3.1
Lithuania : : -1.9 -1.9 -1.3 0.0 -0.6 -1.6 -2.0 -1.2 -1.7 -2.2
Luxembourg : : 1.5 0.4 0.8 0.8 2.7 1.0 0.6 1.1 0.7 0.8
Malta : : -0.5 -7.0 -4.5 -4.4 -3.6 -3.0 -2.3 -3.9 -3.2 -2.6
Netherlands : : 0.4 -1.7 -1.2 -1.0 -0.4 -1.5 -1.3 0.2 -0.9 -1.7
Austria : : -1.7 -4.7 -4.8 -2.8 -4.0 -3.4 -3.6 -2.8 -3.1 -3.2
Portugal : : : -1.3 -0.8 1.1 0.3 0.0 -0.8 0.5 0.4 0.2
Slovakia : : -2.2 -5.7 -1.9 -5.4 -5.2 -4.5 -4.6 -5.5 -4.5 -3.9
Slovenia : : -1.4 -5.8 -4.3 -3.0 -1.2 -1.2 -2.1 -2.3 -2.1 -2.7
Finland : : -1.8 -2.5 0.1 -1.7 -2.7 -2.3 -2.5 -1.9 -1.6 -1.8
Euro area : : : -4.5 -4.0 -3.6 -3.0 -2.9 -3.1 -2.8 -2.6 -2.8
Bulgaria : : 0.7 -4.0 -3.5 -2.8 -2.7 -3.2 -2.7 -2.7 -2.9 -3.0
Czechia : : -0.8 -4.7 -3.3 -3.2 -1.6 -1.7 -2.0 -1.7 -1.8 -1.7
Denmark : : 2.4 4.3 4.4 4.6 5.6 1.3 0.4 3.4 1.5 0.9
Hungary : : -3.9 -7.4 -7.3 -6.6 -4.5 -4.0 -4.7 -4.7 -4.1 -4.2
Poland : : -2.5 -2.2 -4.5 -4.7 -6.1 -6.1 -6.1 -5.3 -5.4 -5.3
Romania : : -3.8 -6.4 -6.4 -6.4 -8.8 -7.9 -7.9 -7.4 -7.4 -7.6
Sweden : : 0.2 -0.4 0.9 0.0 -0.5 -0.4 0.0 -0.7 -0.3 0.1
EU : : : -4.1 -3.7 -3.5 -3.0 -3.0 -3.2 -2.8 -2.7 -2.8

Table 39: Net expenditure growth (in percent, 2024-2026) 30.04.2025

5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium : : : : : : 4.2 5.0 3.0 3.7 3.5 4.1
Germany : : : : : : 4.0 2.1 3.2 2.6 2.7 2.5
Estonia : : : : : : 1.8 2.1 4.1 5.1 5.1 5.6
Ireland : : : : : : 8.2 6.7 6.2 9.2 6.6 5.6
Greece : : : : : : -0.3 4.2 3.1 1.8 3.1 2.8
Spain : : : : : : 3.5 4.2 3.9 4.8 4.0 4.1
France : : : : : : 3.1 0.9 2.5 3.2 -0.1 2.7
Croatia : : : : : : 17.4 7.9 4.9 17.0 6.2 4.4
Italy : : : : : : -2.2 1.2 1.5 -2.3 1.3 1.9
Cyprus : : : : : : 2.9 7.3 5.4 3.9 4.2 3.0
Latvia : : : : : : 4.5 5.7 4.4 3.8 4.1 4.4
Lithuania : : : : : : 10.7 9.0 5.8 10.5 6.6 5.6
Luxembourg : : : : : : 6.2 6.8 5.3 7.8 5.7 4.9
Malta : : : : : : 13.9 0.8 5.3 6.3 5.7 5.5
Netherlands : : : : : : 6.8 7.0 3.8 5.9 7.1 5.0
Austria : : : : : : 8.7 2.0 2.3 6.7 3.0 2.6
Portugal : : : : : : 12.0 6.1 6.3 10.3 4.7 4.1
Slovakia : : : : : : 5.4 3.8 3.9 5.6 3.5 1.9
Slovenia : : : : : : 4.5 4.6 7.0 5.2 4.7 6.6
Finland : : : : : : 3.1 1.3 1.5 3.1 1.7 2.1
Euro area : : : : : : 3.5 2.7 3.0 3.0 2.5 3.0
Bulgaria : : : : : : 10.4 9.2 1.7 7.9 7.6 5.4
Czechia : : : : : : 0.0 4.0 4.8 0.6 3.1 4.0
Denmark : : : : : : 3.3 10.0 5.4 5.1 7.5 5.0
Hungary : : : : : : 2.3 6.1 6.0 3.6 5.7 5.2
Poland : : : : : : 12.7 6.2 5.4 11.8 5.5 6.6
Romania : : : : : : 19.9 5.4 8.1 16.1 9.1 9.3
Sweden : : : : : : 6.1 1.7 2.6 6.2 2.2 2.0
EU : : : : : : 4.4 3.2 3.3 3.9 2.9 3.3

207
European Economic Forecast, Spring 2025

Table 40: Gross debt, general government (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 94.4 104.8 103.4 108.5 102.7 103.2 104.7 107.1 109.8 103.4 105.1 107.2
Germany 69.7 76.3 64.0 68.1 65.0 62.9 62.5 63.8 64.7 63.0 63.2 62.8
Estonia 5.9 10.5 11.3 18.4 19.1 20.2 23.6 23.8 25.4 23.2 24.2 25.5
Ireland 47.6 104.2 62.5 52.6 43.1 43.3 40.9 38.6 38.2 41.6 38.3 36.8
Greece 119.4 176.4 189.4 197.3 177.0 163.9 153.6 146.6 140.6 153.1 146.8 142.7
Spain 45.5 93.2 104.0 115.7 109.5 105.1 101.8 100.9 100.8 102.3 101.3 101.1
France 74.2 93.6 101.7 112.8 111.4 109.8 113.0 116.0 118.4 112.7 115.3 117.1
Croatia 43.8 75.5 77.1 78.2 68.5 61.8 57.6 56.3 56.4 57.3 56.0 56.0
Italy 110.1 129.3 138.1 145.8 138.3 134.6 135.3 136.7 138.2 136.6 138.2 139.3
Cyprus 55.4 96.9 102.0 96.5 81.1 73.6 65.0 58.0 51.9 66.4 61.4 56.7
Latvia 25.1 42.8 40.5 45.9 44.4 44.6 46.8 48.6 49.3 48.1 50.3 51.6
Lithuania 22.5 39.9 38.7 43.3 38.1 37.3 38.2 41.2 43.9 38.3 41.0 44.6
Luxembourg 13.1 20.9 21.8 24.2 24.9 25.0 26.3 25.7 26.2 27.5 27.6 27.5
Malta 63.8 63.0 45.6 49.8 49.5 47.9 47.4 47.6 47.3 49.8 50.4 50.2
Netherlands 51.5 65.0 53.9 50.5 48.4 45.2 43.3 45.0 47.8 43.3 44.3 46.6
Austria 73.6 83.9 78.3 82.4 78.4 78.5 81.8 84.0 85.8 79.5 80.8 81.8
Portugal 81.9 127.4 125.7 123.9 111.2 97.7 94.9 91.7 89.7 95.7 92.9 90.5
Slovakia 33.5 50.9 51.8 60.2 57.7 55.6 59.3 60.9 63.0 58.9 59.8 61.8
Slovenia 28.9 67.2 74.2 74.8 72.7 68.4 67.0 65.5 63.8 67.1 64.4 63.1
Finland 41.0 60.9 68.2 73.2 74.0 77.5 82.1 85.6 87.5 82.6 84.7 85.3
Euro area 73.9 92.8 90.7 95.7 91.2 88.9 88.9 89.9 91.0 89.1 89.6 90.0
Bulgaria 15.8 20.3 24.2 23.8 22.5 22.9 24.1 25.1 27.1 24.5 23.1 24.5
Czechia 30.6 41.7 33.6 40.7 42.5 42.5 43.6 44.5 45.4 43.4 44.4 44.8
Denmark 37.5 47.9 41.0 40.5 34.1 33.6 31.1 29.7 29.4 31.0 29.3 28.3
Hungary 72.0 77.7 71.8 76.2 73.9 73.0 73.5 74.5 74.3 74.5 74.5 73.8
Poland 48.3 53.7 50.9 53.0 48.8 49.5 55.3 58.0 65.3 54.7 58.9 62.4
Romania 17.5 36.5 37.8 48.3 47.9 48.9 54.8 59.4 63.3 52.2 56.1 59.7
Sweden 40.2 41.3 40.0 36.9 33.8 31.6 33.5 33.8 33.3 32.8 32.7 31.7
EU 69.8 86.7 84.2 88.3 83.9 82.1 82.2 83.2 84.5 82.4 83.0 83.4

Table 41: Gross national saving (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 26.8 24.0 24.4 26.3 25.6 24.8 23.8 22.9 22.6 24.6 24.4 24.4
Germany 25.6 27.2 29.0 29.5 27.7 27.9 27.1 26.6 26.6 27.3 26.8 26.7
Estonia 24.3 27.0 27.6 27.5 25.8 23.3 24.1 23.9 23.9 23.5 24.0 24.8
Ireland 19.7 22.3 34.2 35.2 32.3 34.8 33.8 32.5 31.4 33.6 33.3 33.1
Greece 10.4 8.5 8.5 9.2 9.2 8.7 9.9 10.5 11.4 10.2 10.5 11.5
Spain 20.2 19.5 22.3 22.6 23.0 23.7 23.5 23.3 23.5 25.1 25.5 25.7
France 22.3 21.3 21.8 23.5 22.3 21.1 21.0 21.2 21.1 21.1 21.3 21.3
Croatia 19.2 18.1 23.0 22.2 22.6 24.0 22.4 21.9 21.9 23.7 23.9 24.0
Italy 19.4 18.2 21.0 24.1 22.9 23.1 23.3 23.3 23.6 23.1 23.0 23.4
Cyprus 8.9 12.3 13.7 14.3 15.4 11.0 11.9 12.4 12.9 11.4 11.9 11.5
Latvia 24.1 23.6 23.9 21.7 18.8 19.9 17.8 16.7 17.1 18.9 20.0 20.1
Lithuania 16.2 20.6 22.0 23.3 22.0 23.0 23.0 22.4 22.5 23.2 23.0 23.0
Luxembourg 23.9 21.7 20.3 19.9 13.2 16.8 17.4 15.8 15.5 12.2 12.3 12.6
Malta 16.0 19.8 28.0 27.6 23.2 25.0 22.4 22.2 21.5 25.2 25.1 25.2
Netherlands 26.3 26.8 28.1 32.2 29.5 29.8 29.3 29.5 29.5 30.5 30.4 30.3
Austria 27.0 25.9 27.5 29.5 28.2 26.6 24.0 23.6 23.7 25.6 25.2 25.3
Portugal 11.9 14.9 18.4 20.0 19.1 20.7 21.8 21.4 21.3 20.8 20.8 20.8
Slovakia 22.0 23.4 21.0 18.3 14.0 19.7 18.5 18.6 18.9 19.4 19.6 20.3
Slovenia 25.8 22.3 26.9 25.6 23.3 26.7 25.8 25.5 25.5 25.4 25.2 25.2
Finland 26.9 21.2 23.8 25.1 24.9 22.2 20.8 21.2 21.5 21.1 21.3 21.8
Euro area 22.6 22.6 24.7 26.3 24.9 24.9 24.4 24.2 24.2 24.8 24.7 24.8
Bulgaria 16.0 21.6 22.0 20.5 20.1 20.4 19.5 19.0 19.2 19.9 18.8 17.9
Czechia 24.8 23.5 25.2 27.6 26.8 30.6 27.3 26.6 26.5 30.4 30.2 30.1
Denmark 25.5 26.9 29.2 32.3 36.4 32.7 34.7 35.1 35.1 32.5 32.6 32.4
Hungary 18.6 23.6 26.6 27.0 26.1 26.3 26.0 24.6 24.3 25.6 24.9 25.1
Poland 17.4 17.6 19.7 20.4 19.2 19.1 17.9 18.5 18.6 17.9 18.1 18.5
Romania 21.9 23.6 19.7 19.0 17.4 18.5 15.7 16.6 17.8 16.8 18.4 19.5
Sweden 29.4 26.8 27.9 31.5 31.1 31.6 31.7 31.0 31.0 30.8 30.5 30.9
EU 22.7 22.7 24.7 26.3 25.0 25.0 24.4 24.2 24.3 24.7 24.7 24.8
United Kingdom 13.8 12.9 14.4 17.6 15.8 13.8 15.4 15.0 15.0 15.2 14.9 14.9
Japan 28.1 26.0 28.9 29.7 28.8 30.0 30.6 30.8 30.8 30.9 31.0 31.0
United States 16.1 18.4 18.8 17.6 18.3 17.4 17.3 17.9 18.1 18.3 18.5 18.8

208
 Statistical Annex

Table 42: Gross saving, private sector (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 26.0 24.0 24.7 28.8 26.3 25.8 25.0 24.8 24.7 25.7 26.0 26.4
Germany 24.1 24.1 25.5 28.9 25.5 26.2 25.4 25.0 25.2 25.1 24.6 24.3
Estonia 19.2 22.3 24.1 24.8 21.6 20.4 19.4 18.4 19.8 20.1 19.8 20.2
Ireland 20.8 25.8 33.0 34.5 28.5 30.8 29.2 28.6 28.0 29.2 28.9 28.8
Greece 16.5 11.7 7.0 11.9 8.3 6.2 4.5 5.8 5.7 6.3 6.6 7.5
Spain 19.3 23.8 24.7 25.9 24.9 24.8 23.9 23.1 23.0 25.6 25.7 26.0
France 21.6 20.8 21.0 25.2 22.1 21.7 21.8 21.7 22.0 22.3 21.5 21.6
Croatia 16.0 18.4 20.4 20.3 17.6 19.6 18.9 18.7 18.8 20.4 20.4 20.4
Italy 18.5 17.9 21.1 25.7 23.8 22.3 21.6 21.4 21.7 21.8 21.3 21.4
Cyprus 5.9 12.2 10.3 13.7 10.5 5.2 4.8 6.3 6.8 5.1 6.6 6.6
Latvia 23.5 21.6 20.8 24.0 18.2 16.7 13.9 13.9 14.3 17.6 18.9 18.9
Lithuania 16.3 20.3 19.7 21.3 19.3 19.5 20.0 20.5 20.6 20.8 21.6 21.8
Luxembourg 17.0 16.2 14.0 13.6 7.7 11.7 10.6 10.2 10.1 6.7 6.9 7.1
Malta 16.7 19.8 25.3 31.0 25.5 25.7 20.7 22.1 20.9 24.8 24.4 24.2
Netherlands 24.2 26.0 24.6 30.8 25.9 26.7 26.4 28.2 28.2 27.6 28.9 29.1
Austria 25.7 23.7 25.8 31.1 26.8 24.7 23.7 23.2 23.1 24.6 24.4 24.3
Portugal 14.4 17.7 17.8 20.3 16.4 16.8 18.6 18.3 18.6 17.2 17.4 17.6
Slovakia 22.8 23.6 19.9 20.5 12.7 21.5 19.9 19.0 19.2 22.7 21.1 21.6
Slovenia 23.5 22.3 24.8 25.8 21.1 24.2 21.5 21.8 21.9 22.4 22.3 22.3
Finland 21.8 19.5 21.5 23.4 21.0 21.1 20.8 20.2 20.3 20.8 19.7 19.9
Euro area 21.6 22.0 23.3 27.0 23.9 23.9 23.3 23.1 23.3 23.7 23.4 23.5
Bulgaria 12.3 20.4 18.3 22.4 21.4 19.7 19.8 18.7 19.5 20.2 19.1 18.5
Czechia 22.1 21.2 21.6 28.1 25.3 29.8 25.2 24.6 24.6 28.6 28.0 27.7
Denmark 20.6 23.3 24.0 24.9 29.5 25.4 26.1 28.8 29.7 26.1 27.1 27.3
Hungary 19.6 22.6 23.3 26.7 24.2 26.9 25.5 24.1 24.2 25.6 24.1 23.7
Poland 17.4 17.5 18.3 18.3 18.2 18.6 18.8 19.5 19.4 18.0 18.4 18.1
Romania 21.1 21.9 20.7 22.5 19.5 20.6 19.5 19.4 20.2 20.9 22.3 23.2
Sweden 23.9 23.4 22.9 26.9 24.9 27.1 27.1 26.5 25.6 26.8 26.3 25.4
EU 21.5 21.9 23.0 26.5 23.8 23.9 23.2 23.1 23.2 23.6 23.4 23.4
United Kingdom 16.1 15.8 15.3 21.2 17.1 14.3 15.5 14.2 13.3 14.7 13.7 13.1
Japan 29.6 28.6 29.3 31.2 28.9 28.2 29.2 29.6 29.7 33.2 32.7 32.3
United States 19.8 22.1 23.2 26.0 19.3 21.0 21.2 20.4 19.7 21.9 21.8 21.6

209
European Economic Forecast, Spring 2025

Table 43: Saving rate of households (2006-2026) 30.04.2025

5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 17.1 13.2 12.9 16.6 12.7 14.1 13.5 13.0 12.6 14.0 13.7 13.6
Germany 16.8 16.7 18.7 21.9 18.9 19.3 20.1 20.0 19.9 19.5 18.9 18.1
Estonia 6.0 7.5 9.9 8.6 2.8 3.1 3.8 3.3 5.2 6.1 5.4 5.6
Ireland 11.4 12.5 15.8 22.5 15.1 13.6 14.2 13.6 13.4 12.9 12.8 12.6
Greece 9.2 -2.1 -2.9 4.4 -3.5 -1.9 -2.5 -2.5 -1.8 -0.2 0.5 0.2
Spain 8.6 8.2 9.3 14.3 9.1 12.0 13.6 13.1 12.9 12.5 11.9 11.6
France 14.8 14.4 15.0 18.7 16.5 16.5 17.0 17.0 17.0 17.1 16.9 16.9
Croatia 7.3 7.7 9.2 10.6 6.4 10.2 : : : : : : :
Italy 14.6 11.3 12.2 15.8 11.4 11.2 11.8 11.8 11.7 12.5 12.0 12.0
Cyprus 7.9 3.4 5.9 15.0 12.3 9.9 10.0 11.0 11.9 10.9 11.6 12.2
Latvia 7.0 0.4 7.9 10.4 3.1 5.4 7.5 7.5 7.7 12.8 14.9 15.0
Lithuania 0.1 -0.8 1.7 10.1 4.7 6.8 11.4 12.8 14.1 11.1 12.2 12.3
Luxembourg 2) 11.4 13.8 15.7 18.0 13.4 : : : : 17.8 17.7 17.4
Malta 2.4 4.0 14.0 20.2 13.2 11.4 : : : : : : :
Netherlands 11.7 14.0 16.1 19.1 14.4 14.5 14.4 15.8 15.6 14.4 15.6 15.3
Austria 17.1 13.5 14.4 17.3 15.0 14.9 18.0 17.4 16.7 17.1 16.4 15.6
Portugal 8.7 8.4 8.0 11.0 7.3 8.3 12.2 11.9 11.6 9.7 10.0 9.8
Slovakia 8.6 8.4 9.7 11.4 5.9 7.4 5.9 6.0 5.6 11.3 10.6 10.8
Slovenia 15.1 10.8 14.9 17.6 13.4 14.3 12.9 13.5 13.1 15.4 15.1 14.9
Finland 8.3 8.8 10.2 12.5 10.0 10.2 9.8 9.0 9.0 10.8 9.7 9.7
Euro area 1)
13.1 12.3 13.9 17.3 13.6 14.3 15.3 15.2 15.1 15.5 15.2 14.8
Bulgaria -6.0 -1.4 -0.3 -5.6 -6.6 -5.5 -4.9 -3.2 -1.5 : : :
Czechia 13.2 11.5 12.7 19.6 18.2 19.4 18.4 17.7 17.4 18.8 18.7 18.1
Denmark 4.4 5.2 9.0 5.8 9.7 9.7 9.1 11.5 11.7 11.4 11.8 11.9
Hungary 10.8 12.5 14.8 19.1 16.9 20.0 18.0 17.4 17.1 21.1 17.8 16.1
Poland 7.5 5.9 7.5 5.1 1.0 2.4 6.6 6.6 6.5 4.2 4.1 4.0
Romania : : : : : : : : : : : :
Sweden 10.6 15.0 16.1 17.5 14.8 16.2 18.1 17.4 15.9 18.4 17.9 16.0
EU 1)
12.5 11.7 13.1 16.2 12.7 13.3 14.5 14.3 14.1 14.8 14.4 14.0
United Kingdom 9.5 8.8 7.9 12.7 6.0 7.3 10.1 10.4 10.1 7.5 7.3 6.7
Japan 11.7 9.0 11.4 14.6 11.9 8.9 9.8 9.9 9.8 14.6 13.7 13.1
United States 10.1 11.7 13.7 16.7 9.5 11.0 10.3 10.0 9.6 12.4 12.6 12.6
1) In the Spring Forecast 2025, there is no forecast of houshold saving for Croatia and Malta, so saving rate for EU/EA is historical until 2024, and then it is extrapolated with the level shift for EU/EA excluding Croatia and Malta. 2) Due to known issues
with the household sector compensation of employees (ESA code D1) data for Luxembourg, which will be addressed by the national Statistical Institute only later in 2025, figures for D1 or depending on D1 in their compilation, e.g. the saving rate of
households, will not be published in the present forecast (for years 2023-2026).

Table 44: Gross saving, general government (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.9 0.0 -0.3 -2.4 -0.7 -1.0 -1.2 -1.9 -2.1 -1.1 -1.6 -2.0
Germany 1.6 3.1 3.5 0.6 2.2 1.6 1.7 1.6 1.3 2.2 2.2 2.3
Estonia 5.1 4.7 3.5 2.7 4.3 2.9 4.7 5.5 4.1 3.3 4.2 4.6
Ireland -1.0 -3.4 1.1 0.7 3.8 4.0 4.6 3.9 3.4 4.4 4.5 4.3
Greece -6.1 -3.2 1.6 -2.7 0.9 2.6 5.4 4.7 5.7 3.9 3.9 4.0
Spain 0.8 -4.3 -2.4 -3.3 -1.9 -1.1 -0.4 0.2 0.5 -0.6 -0.3 -0.3
France 0.8 0.5 0.8 -1.7 0.2 -0.6 -0.8 -0.6 -0.9 -1.2 -0.2 -0.3
Croatia 3.2 -0.3 2.6 1.9 5.0 4.5 3.5 3.1 3.1 3.3 3.5 3.6
Italy 0.9 0.3 -0.1 -1.6 -0.9 0.8 1.6 1.9 2.0 1.3 1.7 2.0
Cyprus 3.0 0.1 3.4 0.5 4.8 5.8 7.1 6.1 6.1 6.3 5.3 4.9
Latvia 0.6 2.1 3.1 -2.3 0.5 3.2 4.0 2.9 2.9 1.3 1.2 1.2
Lithuania -0.1 0.4 2.3 1.9 2.7 3.5 3.0 1.8 1.9 2.4 1.4 1.1
Luxembourg 6.9 5.5 6.3 6.3 5.5 5.1 6.8 5.6 5.4 5.4 5.4 5.5
Malta -0.7 0.1 2.6 -3.4 -2.3 -0.7 1.7 0.0 0.6 0.4 0.7 0.9
Netherlands 2.0 0.8 3.5 1.3 3.5 3.1 2.9 1.3 1.3 2.9 1.5 1.2
Austria 1.3 2.2 1.8 -1.7 1.4 1.9 0.4 0.4 0.5 0.9 0.8 0.9
Portugal -2.5 -2.9 0.7 -0.3 2.7 4.0 3.3 3.1 2.7 3.7 3.4 3.3
Slovakia -0.8 -0.2 1.1 -2.1 1.2 -1.7 -1.4 -0.4 -0.4 -3.4 -1.5 -1.3
Slovenia 2.2 0.0 2.0 -0.3 2.2 2.4 4.2 3.7 3.6 3.0 2.9 2.8
Finland 5.2 1.8 2.2 1.7 3.8 1.1 -0.1 1.0 1.2 0.3 1.6 1.9
Euro area 1.0 0.6 1.4 -0.7 1.0 1.0 1.1 1.1 1.0 1.1 1.3 1.3
Bulgaria 3.7 1.3 3.6 -1.9 -1.3 0.7 -0.3 0.3 -0.3 -0.4 -0.3 -0.6
Czechia 2.7 2.3 3.5 -0.5 1.5 0.8 2.1 2.0 1.9 1.8 2.2 2.3
Denmark 5.0 3.6 5.2 7.4 6.8 7.3 8.5 6.2 5.4 6.4 5.6 5.1
Hungary -1.1 1.0 3.3 0.4 1.9 -0.6 0.5 0.5 0.2 -0.1 0.8 1.3
Poland 0.0 0.1 1.4 2.1 1.0 0.4 -0.9 -1.1 -0.8 -0.1 -0.3 0.4
Romania 0.8 1.7 -1.0 -3.5 -2.1 -2.1 -3.8 -2.9 -2.4 -4.1 -3.9 -3.6
Sweden 5.5 3.4 5.0 4.6 6.2 4.5 4.5 4.5 5.4 3.9 4.1 5.5
EU 1.2 0.8 1.6 -0.3 1.3 1.1 1.2 1.1 1.1 1.1 1.3 1.4
United Kingdom -2.2 -2.8 -0.9 -3.6 -1.3 -0.5 -0.1 0.7 1.6 0.4 1.2 1.8
Japan -1.5 -2.6 -0.4 -1.5 -0.1 1.8 1.5 1.2 1.1 -2.3 -1.7 -1.2
United States -3.7 -3.6 -4.4 -8.4 -1.0 -3.6 -3.9 -2.6 -1.6 -3.6 -3.3 -2.8

210
 Statistical Annex

Table 45: Exports of goods and services, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.1 2.7 1.9 14.7 5.8 -7.1 -3.4 -1.8 1.9 -2.0 1.8 2.6
Germany 3.8 4.0 0.1 10.0 3.1 -0.3 -1.1 -1.9 1.1 0.0 1.4 2.6
Estonia 4.3 6.2 2.6 22.1 5.0 -9.0 -1.1 2.2 2.4 -0.2 2.9 3.0
Ireland 4.3 11.9 9.2 14.1 13.5 -5.8 11.7 1.3 2.8 10.1 1.0 3.8
Greece 0.8 3.5 -0.6 24.4 6.6 1.9 1.0 3.1 3.2 2.3 3.7 3.5
Spain 1.7 4.4 -1.6 13.4 14.3 2.8 3.1 2.4 2.3 3.4 2.9 2.7
France 1.2 3.8 -1.2 11.3 8.2 2.1 1.3 1.1 2.3 1.8 3.0 3.5
Croatia 0.6 4.1 -0.5 32.7 27.0 -2.9 0.9 2.3 2.6 0.2 2.9 3.1
Italy 0.4 2.7 -0.8 14.1 9.9 0.2 0.4 0.9 1.7 0.3 2.3 3.0
Cyprus 1.7 4.5 7.1 27.2 27.1 -2.8 5.3 3.7 3.5 7.7 3.5 2.4
Latvia 4.4 6.4 2.7 9.1 11.4 -4.7 -1.6 1.8 2.0 -1.8 1.6 2.4
Lithuania 5.5 6.5 7.0 16.6 12.4 -3.4 2.1 3.0 3.3 3.5 3.2 3.5
Luxembourg 3.9 4.8 3.3 11.3 1.5 -0.3 0.3 3.1 3.2 1.0 4.1 3.7
Malta 7.7 9.6 10.0 -0.4 13.7 5.6 5.3 3.5 2.9 3.2 3.2 2.9
Netherlands 2.9 5.2 2.5 6.9 4.4 -0.5 0.4 0.7 1.9 0.0 2.3 2.5
Austria 2.8 2.8 1.1 9.5 10.0 -0.4 -4.3 -1.0 1.9 -2.0 2.2 2.7
Portugal 3.2 5.5 0.1 12.0 17.2 3.8 3.4 1.7 2.8 3.8 3.0 3.2
Slovakia 7.4 6.9 1.7 10.7 2.8 -0.7 0.3 1.9 1.8 2.0 3.8 4.0
Slovenia 4.5 4.3 3.7 14.5 6.8 -2.0 3.2 2.2 3.0 0.9 3.0 3.4
Finland 1.6 0.4 2.5 6.0 4.4 0.2 0.1 2.5 2.4 -0.2 3.1 2.8
Euro area 2.5 4.3 1.2 11.5 7.4 -0.8 1.1 0.3 2.0 1.5 2.2 3.0
Bulgaria 5.3 6.7 1.9 11.6 12.1 0.0 -0.8 1.6 2.1 0.5 3.0 2.9
Czechia 6.5 5.6 1.4 8.2 5.1 2.7 1.8 1.1 2.4 1.1 2.4 3.0
Denmark 2.1 3.2 1.9 8.8 7.2 10.4 7.5 5.4 2.5 4.7 2.0 2.5
Hungary 8.0 5.0 2.8 8.3 10.7 1.7 -3.0 0.2 2.8 -1.9 2.5 5.2
Poland 7.5 5.8 5.7 12.3 7.4 3.7 2.0 1.6 2.3 0.9 2.4 3.0
Romania 10.9 9.2 4.7 12.6 9.3 -0.8 -3.1 1.8 2.8 -2.0 2.2 2.4
Sweden 1.7 3.2 2.4 11.9 6.2 3.7 2.3 2.0 1.9 1.7 1.9 2.8
EU 2.9 4.4 1.5 11.3 7.4 0.1 1.2 0.7 2.1 1.4 2.2 3.0
United Kingdom 2.0 2.5 0.3 3.2 12.6 -0.4 -1.2 0.4 1.5 -1.6 0.9 1.3
Japan 3.1 2.6 -0.4 11.9 5.5 3.0 1.0 1.8 1.3 0.2 2.5 2.2
United States 5.4 3.6 -1.2 6.5 7.5 2.8 3.3 1.7 1.6 3.3 2.9 3.1

Table 46: Imports of goods and services, volume (percentage change on preceding year, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.5 2.9 1.9 12.8 5.8 -6.8 -3.5 -1.0 2.1 -2.2 1.9 2.7
Germany 3.8 3.3 1.5 9.0 7.0 -0.6 0.2 0.9 1.5 -1.1 1.8 2.9
Estonia 1.5 7.5 4.1 22.7 5.0 -6.7 0.0 2.6 2.9 -0.5 2.5 3.1
Ireland 2.8 10.0 11.2 -8.7 16.0 1.2 6.5 3.2 2.7 8.4 2.8 3.1
Greece -0.3 -1.0 2.5 17.4 11.0 0.9 5.5 4.2 3.5 5.0 4.1 3.5
Spain -0.8 0.9 -0.4 15.0 7.7 0.3 2.4 3.2 2.8 2.2 2.8 3.0
France 2.2 3.8 0.0 8.3 8.8 0.3 -1.2 1.3 2.1 -1.7 2.0 3.0
Croatia -1.6 3.2 3.0 17.3 26.5 -5.3 5.3 3.8 3.3 4.5 3.7 3.0
Italy 1.2 -0.3 -0.4 16.0 12.9 -1.6 -0.7 1.7 2.4 -3.4 2.9 3.1
Cyprus 4.2 0.8 8.2 19.6 29.7 -0.7 2.4 3.6 3.5 7.2 2.9 1.9
Latvia -0.2 6.0 3.9 15.1 9.9 -2.0 -2.3 2.1 2.1 -3.1 1.8 2.5
Lithuania 3.2 6.4 4.5 19.2 12.7 -5.3 2.4 3.9 3.7 2.5 3.9 3.8
Luxembourg 4.0 5.7 3.3 13.4 2.4 0.4 -0.3 3.8 3.8 1.0 4.6 4.1
Malta 5.3 8.7 10.1 -2.8 18.4 2.0 4.7 3.1 2.4 3.0 2.7 2.5
Netherlands 2.8 5.9 2.0 6.5 4.4 -1.8 0.3 1.2 2.2 -0.5 2.5 3.1
Austria 2.2 2.8 1.2 14.1 7.1 -4.6 -5.0 -0.6 1.9 -2.4 2.2 2.3
Portugal 2.5 1.4 2.1 12.3 11.3 1.8 4.9 4.3 4.1 4.6 4.1 4.1
Slovakia 5.4 5.5 1.5 11.7 4.2 -7.6 2.3 2.1 2.4 4.3 3.9 3.2
Slovenia 3.6 2.5 3.7 17.8 9.2 -4.5 3.9 2.2 3.4 3.5 3.3 4.1
Finland 1.7 1.7 2.3 7.0 9.3 -6.7 -2.4 2.6 2.9 -1.0 3.3 2.5
Euro area 2.3 3.3 1.9 9.0 8.4 -1.4 0.3 1.6 2.2 0.0 2.5 3.0
Bulgaria 3.1 5.8 3.7 10.7 15.3 -5.5 1.3 2.4 2.8 2.2 3.2 3.8
Czechia 5.8 5.1 1.3 13.7 5.9 -0.9 0.9 2.5 3.6 0.2 3.8 3.5
Denmark 2.3 4.1 2.6 9.5 4.4 3.7 3.0 4.0 2.6 1.8 2.4 2.3
Hungary 5.5 4.2 4.5 7.4 10.7 -3.4 -4.0 1.1 3.5 -3.5 3.9 6.0
Poland 8.4 4.1 5.1 16.3 6.8 -1.5 4.2 3.0 3.1 2.8 3.6 3.1
Romania 12.3 6.7 7.9 14.6 9.3 -1.1 3.8 2.9 3.2 4.9 3.2 3.1
Sweden 3.2 4.0 1.9 12.8 9.7 -0.8 1.7 1.8 1.3 0.3 1.7 2.4
EU 2.8 3.5 2.2 9.6 8.3 -1.3 0.6 1.7 2.3 0.2 2.6 3.0
United Kingdom 1.8 3.7 -0.9 5.8 13.0 -1.2 2.7 1.6 1.5 0.9 0.6 1.5
Japan 0.3 4.6 0.0 5.2 8.3 -1.5 1.3 1.6 1.3 0.0 2.7 2.2
United States 1.1 3.8 0.3 14.7 8.6 -1.2 5.3 1.4 -0.3 5.6 3.3 2.9

211
European Economic Forecast, Spring 2025

Table 47: Merchandise trade balance¹ (fob-fob, as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 0.7 -0.9 0.6 2.1 -0.2 0.5 1.3 1.4 1.5 2.2 2.3 2.4
Germany 6.5 7.1 6.6 5.1 3.4 5.6 5.7 5.3 5.3 6.5 6.4 6.3
Estonia -10.7 -4.8 -3.6 -4.3 -7.8 -6.0 -6.9 -6.7 -6.4 -5.7 -5.1 -4.8
Ireland 18.8 25.1 35.1 37.5 39.4 30.6 33.1 32.8 31.4 30.5 28.7 27.9
Greece -15.9 -11.2 -11.6 -14.4 -19.0 -14.5 -15.0 -15.0 -14.9 -14.7 -14.8 -14.9
Spain -6.7 -2.4 -1.6 -1.7 -4.4 -2.3 -2.0 -2.4 -2.4 -1.9 -1.8 -1.8
France -1.8 -2.1 -1.7 -2.7 -4.9 -2.8 -1.9 -1.7 -1.7 -2.0 -1.9 -1.8
Croatia -18.8 -14.7 -17.5 -19.5 -26.8 -21.8 -20.4 -19.4 -19.1 -20.4 -20.1 -19.8
Italy -0.4 1.7 3.2 2.5 -1.3 1.7 2.6 2.8 3.0 2.9 2.8 2.8
Cyprus -25.9 -19.1 -21.1 -16.9 -19.7 -23.7 -20.4 -19.9 -19.7 -22.4 -21.8 -20.9
Latvia -17.5 -12.3 -8.2 -8.6 -11.4 -9.3 -8.2 -8.5 -7.9 -8.9 -8.9 -9.1
Lithuania -10.4 -4.3 -4.3 -5.1 -10.9 -6.2 -6.0 -6.7 -6.9 -5.4 -5.4 -5.4
Luxembourg -2.0 3.8 3.5 0.5 -0.6 1.5 1.7 1.5 2.1 -0.1 0.0 0.5
Malta -19.3 -16.6 -11.6 -12.1 -17.5 -15.4 -11.8 -11.5 -11.1 -11.8 -11.4 -11.1
Netherlands 8.0 9.4 9.0 7.3 5.5 8.0 8.7 9.2 9.7 8.5 8.5 8.3
Austria 0.2 -0.3 0.7 0.0 -1.9 0.9 2.1 2.5 2.5 1.6 1.7 1.9
Portugal -11.6 -6.1 -6.9 -7.6 -11.2 -9.7 -9.2 -9.6 -10.0 -9.3 -9.8 -10.3
Slovakia -1.4 2.9 -0.1 -1.4 -6.6 0.6 -0.3 -0.7 -0.9 0.2 -0.4 0.2
Slovenia -3.1 1.2 3.6 1.7 -4.3 0.7 1.0 1.1 0.9 -0.6 -0.9 -1.2
Finland 6.4 1.0 0.6 0.9 -0.1 3.3 2.5 2.4 2.3 3.0 2.9 0.0
Euro area 0.7 2.3 3.1 2.6 0.4 2.2 2.7 2.7 2.7 2.9 2.9 2.8
Euro area, adjusted 2)
: 2.3 2.8 2.3 -0.3 1.8 2.5 2.4 2.4 2.5 2.5 2.4
Bulgaria -19.1 -7.2 -3.3 -4.0 -5.9 -4.1 -5.2 -5.3 -5.3 -5.9 -6.4 -7.2
Czechia 0.8 3.6 4.6 1.7 -0.3 3.9 5.2 4.9 4.6 5.1 4.3 4.1
Denmark 2.6 4.6 4.7 3.3 2.8 7.4 9.4 10.4 10.4 9.1 9.0 8.9
Hungary -0.3 2.4 -0.3 -2.9 -9.2 -0.2 0.7 0.2 -0.1 1.2 0.3 0.3
Poland -4.4 -1.9 -0.6 -1.3 -3.3 0.6 -0.8 0.0 -0.2 -0.2 -0.4 -0.6
Romania -12.6 -5.5 -7.3 -9.5 -11.4 -8.9 -9.3 -9.2 -8.7 -9.1 -8.5 -7.9
Sweden 5.7 3.6 3.0 4.6 3.7 5.4 5.9 6.1 6.2 5.6 5.8 5.9
EU 0.6 2.1 2.8 2.2 0.0 2.1 2.6 2.6 2.6 2.7 2.6 2.6
EU, adjusted 2)
-0.1 1.5 2.4 1.8 -0.8 1.6 2.1 2.2 2.2 2.2 2.1 2.1
United Kingdom -5.9 -6.7 -6.6 -7.1 -8.2 -7.7 -7.9 -8.1 -8.1 -7.1 -7.0 -7.0
Japan 1.8 -1.0 0.5 0.3 -2.8 -1.1 -0.6 -0.8 -0.9 -0.8 -0.9 -1.0
United States -5.2 -4.5 -4.2 -4.6 -4.6 -3.9 -4.1 -4.0 -3.8 -4.1 -4.1 -4.1
1) See note 7 on concepts and sources.
2) See note 8 on concepts and sources.

Table 48: Current-account balance¹ (as a percentage of GDP, 2006-2026) 30.04.2025

5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 3.0 0.5 -0.2 1.9 -1.3 -0.6 -0.2 -0.7 -1.0 0.4 0.3 0.3
Germany 5.8 7.1 8.0 7.0 4.6 6.2 6.1 5.3 5.3 7.1 6.8 6.5
Estonia -6.8 0.3 0.7 -3.6 -3.9 -1.7 -2.0 -2.1 -2.0 -1.5 -1.0 -0.7
Ireland -4.8 1.2 -4.7 12.2 8.8 8.1 17.0 12.6 11.6 13.6 9.7 9.8
Greece -12.6 -4.0 -4.1 -8.3 -10.8 -8.0 -8.3 -8.2 -7.9 -7.1 -7.5 -7.2
Spain -6.9 0.7 2.1 0.8 0.4 2.7 3.1 2.7 2.8 4.2 4.5 4.4
France 0.0 -0.5 -0.6 0.0 -1.9 -2.0 -0.9 -0.6 -0.6 -0.5 -0.3 -0.3
Croatia -6.9 -0.5 1.2 0.4 -3.4 0.8 -0.7 -1.1 -1.1 0.4 0.5 0.6
Italy -2.1 0.2 2.9 2.1 -1.7 0.1 0.9 1.3 1.6 1.1 1.2 1.4
Cyprus -15.8 -2.4 -5.6 -5.4 -5.4 -9.5 -7.0 -6.5 -5.9 -9.2 -8.4 -8.2
Latvia -9.3 -2.3 1.1 -4.1 -5.5 -3.9 -3.3 -3.9 -3.5 -3.2 -2.1 -2.3
Lithuania -7.5 -0.5 2.2 1.4 -6.1 1.1 2.6 2.0 1.9 2.7 2.5 2.4
Luxembourg 5.2 2.9 2.2 1.2 -3.9 -0.6 2.3 0.8 0.3 -4.5 -4.3 -4.0
Malta -5.7 1.2 7.2 3.6 -1.8 4.6 3.6 3.7 3.4 5.7 5.7 5.9
Netherlands 4.9 7.4 7.4 10.0 6.6 9.9 10.0 10.2 10.6 11.1 11.1 11.0
Austria 3.2 2.0 2.2 1.8 -0.8 1.4 2.0 2.4 2.3 1.7 1.5 1.5
Portugal -10.4 -1.2 0.4 -0.9 -2.3 0.3 1.7 1.2 0.9 0.9 0.6 0.4
Slovakia -4.9 -0.3 -2.3 -4.4 -9.2 -0.1 -1.6 -2.3 -2.5 -1.3 -2.0 -1.4
Slovenia -2.9 2.3 6.5 3.7 -1.1 4.4 4.6 4.7 4.8 3.0 2.9 2.6
Finland 2.8 -1.6 -0.8 0.3 -2.4 -0.6 -0.8 -0.7 -0.7 -0.6 -0.9 -0.9
Euro area 0.3 2.5 3.2 3.6 1.0 2.6 3.3 3.0 3.0 3.8 3.6 3.6
Euro area, adjusted 2)
: 2.4 2.8 2.7 -0.1 1.7 2.8 2.5 2.6 3.0 2.8 2.8
Bulgaria -14.8 0.3 1.8 -0.2 -2.6 0.7 -0.8 -1.1 -1.0 0.3 -0.2 -1.2
Czechia -4.5 -2.3 -0.2 -0.5 -4.3 2.6 1.2 0.8 0.5 4.3 3.3 3.2
Denmark 3.5 7.2 7.1 8.7 11.7 9.8 13.0 13.7 13.5 10.6 10.1 9.8
Hungary -5.1 1.3 0.9 -3.9 -8.4 0.5 2.4 2.0 1.5 2.1 1.2 1.0
Poland -5.3 -3.2 -0.5 -1.4 -2.9 1.8 0.2 1.0 0.7 0.6 0.4 0.3
Romania -7.3 -2.5 -4.1 -7.3 -9.6 -7.3 -8.5 -7.9 -7.0 -8.3 -7.6 -6.9
Sweden 6.7 4.0 3.2 6.3 4.2 6.7 7.0 6.8 7.0 6.6 6.4 6.5
EU 0.1 2.3 3.0 3.2 0.8 2.6 3.2 3.0 3.0 3.6 3.4 3.3
EU, adjusted 2)
-0.2 2.0 2.8 2.9 0.1 1.9 2.7 2.6 2.6 3.0 2.8 2.8
United Kingdom -3.3 -3.9 -3.7 -0.4 -2.1 -3.5 -2.7 -2.6 -2.6 -2.3 -2.3 -2.3
Japan 3.6 1.5 3.6 3.9 2.0 3.8 4.8 4.4 4.3 4.4 4.5 4.7
United States -4.3 -2.4 -2.2 -3.7 -3.9 -3.3 -3.7 -3.6 -3.4 -3.5 -3.3 -3.2
1) See note 7 on concepts and sources. 2) See note 8 on concepts and sources.

212
 Statistical Annex

Table 49: Net lending (+) or net borrowing (-) of the nation¹ (as a percentage of GDP, 2006-2026) 30.04.2025
5-year Spring 2025 Autumn 2024
averages Forecast Forecast
2006 - 10 2011 - 15 2016 - 20 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 2.9 0.6 -0.1 2.1 -1.2 -0.4 -0.1 -0.5 -0.9 0.6 0.5 0.4
Germany 5.7 6.9 7.7 6.7 3.9 5.3 5.1 4.4 4.4 6.3 5.9 5.7
Estonia -4.5 2.9 2.0 5.4 -3.5 -0.5 -0.8 -0.7 -0.4 -0.2 0.4 0.8
Ireland -4.7 0.4 -12.4 12.5 8.6 6.4 13.6 9.4 8.5 7.2 7.0 6.6
Greece -10.8 -1.8 -2.6 -5.6 -8.3 -5.7 -7.3 -5.4 -4.2 -5.3 -4.8 -4.1
Spain -6.5 1.2 2.5 1.6 1.3 3.7 4.2 3.9 4.0 5.3 5.6 5.6
France 0.0 -0.6 -0.7 0.4 -1.6 -1.7 -0.6 -0.5 -0.3 -0.2 -0.2 -0.2
Croatia -6.7 -0.1 2.8 2.9 -0.9 3.6 0.7 1.4 1.6 2.7 3.4 3.4
Italy -2.1 0.3 2.9 2.2 -1.2 0.9 0.9 1.6 2.0 1.0 1.1 1.3
Cyprus -15.6 -2.0 -5.4 -5.1 -5.3 -9.6 -6.7 -6.2 -5.6 -8.9 -8.1 -7.9
Latvia -7.5 0.5 2.6 -2.7 -4.7 -2.0 -1.7 -1.9 -1.4 -1.4 0.2 0.0
Lithuania -4.7 2.5 3.7 2.9 -4.6 2.7 4.2 3.7 3.7 4.3 4.2 4.2
Luxembourg 3.6 2.0 0.6 -1.4 -4.6 -1.2 1.6 -0.2 -0.6 -5.6 -5.5 -5.2
Malta -4.2 3.0 8.5 5.1 -0.6 6.0 5.0 4.7 4.4 6.7 6.7 6.9
Netherlands 4.8 6.0 7.0 10.1 17.2 9.6 9.8 10.1 10.5 10.9 10.9 10.9
Austria 3.1 1.9 2.0 1.9 -0.8 1.9 2.5 2.9 2.7 2.1 1.9 1.9
Portugal -9.2 0.4 1.4 0.8 -1.3 1.7 2.9 2.4 2.0 2.4 2.1 1.8
Slovakia -4.0 1.2 -2.1 -4.5 -9.7 -0.4 -2.1 -1.9 -2.3 -1.5 -2.3 -1.7
Slovenia -2.5 2.9 5.9 4.1 -1.4 4.4 4.4 4.6 4.6 2.8 2.7 2.4
Finland 2.9 -1.5 -0.7 0.4 -2.4 -0.7 -0.9 -0.8 -0.8 -0.7 -1.1 -1.0
Euro area 0.4 2.5 3.0 3.8 1.9 2.6 3.1 2.9 3.0 3.5 3.5 3.5
Euro area, adjusted 2)
: 2.4 2.5 2.9 0.7 1.7 2.6 2.5 2.6 2.7 2.7 2.7
Bulgaria -13.9 2.2 3.3 0.5 -1.7 1.0 -1.7 -1.4 -0.9 1.0 1.6 0.6
Czechia -3.2 -0.4 0.5 1.1 -3.7 3.5 2.9 2.5 2.0 5.3 4.4 4.1
Denmark 3.5 7.2 7.1 8.7 11.7 9.5 12.7 13.3 13.1 10.2 9.6 9.3
Hungary -3.9 4.7 2.2 -1.5 -6.7 1.4 2.8 2.6 2.4 2.7 2.1 2.1
Poland -4.2 -1.2 0.9 -0.6 -2.7 2.0 0.5 1.3 1.0 1.1 1.1 1.1
Romania -6.8 -0.5 -2.3 -5.5 -7.5 -5.0 -7.2 -6.5 -5.5 -6.0 -5.1 -4.3
Sweden 6.5 3.9 3.2 6.3 4.3 6.7 7.1 6.8 7.0 6.5 6.3 6.5
EU 0.3 2.5 2.9 3.5 1.6 2.7 3.1 3.0 3.1 3.5 3.4 3.4
EU, adjusted 2)
0.0 2.2 2.6 3.1 0.9 2.0 2.7 2.6 2.7 2.9 2.8 2.8
United Kingdom -3.3 -4.0 -3.9 -0.5 -2.2 -3.7 -2.8 -2.8 -2.8 -2.6 -2.5 -2.5
Japan 3.5 1.5 3.5 3.8 2.0 3.7 4.7 4.3 4.2 4.4 4.5 4.7
United States -4.3 -2.5 -2.2 -3.7 -3.9 -3.3 -3.7 -3.6 -3.4 -3.6 -3.4 -3.3
1) See note 7 on concepts and sources; 2) See note 8 on concepts and sources.

Table 50: Current-account balance¹ (in billions of euro, 2018-2026) 30.04.2025

Spring 2025 Autumn 2024
Forecast Forecast
2018 2019 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium -6.7 0.6 4.3 9.4 -7.4 -3.8 -1.5 -4.5 -6.8 2.6 1.9 1.7
Germany 294.5 282.0 220.0 258.2 183.2 259.2 260.6 234.8 241.7 306.1 299.9 297.7
Estonia 0.1 0.6 -0.7 -1.1 -1.4 -0.7 -0.8 -0.9 -0.8 -0.6 -0.4 -0.3
Ireland 14.4 -75.4 -27.0 54.6 45.6 41.3 90.8 71.2 68.7 71.5 53.8 57.5
Greece -7.4 -5.0 -13.8 -15.2 -22.4 -18.0 -19.7 -20.6 -20.9 -16.9 -18.8 -18.8
Spain 22.8 26.7 8.9 9.6 4.8 39.8 48.6 45.6 48.2 66.5 74.2 76.0
France -16.8 10.4 -44.4 1.2 -51.0 -56.7 -26.5 -19.3 -18.7 -14.4 -8.9 -8.0
Croatia 0.4 1.2 -0.8 0.2 -2.3 0.6 -0.6 -1.0 -1.0 0.3 0.5 0.6
Italy 44.5 57.0 62.8 38.7 -34.5 2.9 19.8 29.7 35.9 24.9 26.9 32.8
Cyprus -0.8 -1.3 -2.2 -1.4 -1.6 -3.0 -2.4 -2.3 -2.2 -3.1 -3.0 -3.0
Latvia -0.1 -0.1 0.9 -1.3 -2.0 -1.5 -1.3 -1.6 -1.5 -1.3 -0.9 -1.0
Lithuania 0.2 1.8 3.6 0.8 -4.1 0.8 2.0 1.7 1.7 2.1 2.1 2.1
Luxembourg 2.4 -0.3 1.7 0.9 -3.0 -0.5 2.0 0.7 0.3 -3.7 -3.8 -3.7
Malta 1.4 1.1 0.6 0.6 -0.3 1.0 0.8 0.9 0.9 1.3 1.3 1.5
Netherlands 70.8 56.8 45.6 89.3 65.7 105.2 113.1 122.1 131.5 125.1 131.6 135.4
Austria 3.7 9.8 13.3 7.4 -3.4 6.8 9.8 12.0 11.7 8.2 7.5 7.6
Portugal 0.9 0.9 -1.9 -2.0 -5.5 0.7 5.0 3.7 2.8 2.6 1.9 1.2
Slovakia -1.6 -3.4 -0.6 -4.5 -10.2 -0.1 -2.1 -3.1 -3.6 -1.7 -2.8 -2.1
Slovenia 3.0 3.1 3.6 1.9 -0.6 2.8 3.1 3.3 3.5 2.0 2.1 2.0
Finland -3.7 -0.3 1.0 0.8 -6.4 -1.5 -2.1 -2.0 -2.1 -1.7 -2.6 -2.5
Euro area 421.9 366.3 274.8 448.2 143.2 375.3 498.5 470.4 489.3 569.7 562.4 576.7
Euro area, adjusted 2)
348.7 290.0 212.2 343.6 -14.7 243.2 425.9 397.8 416.7 449.1 441.7 456.0
Bulgaria 0.3 1.0 0.3 -0.2 -2.2 0.6 -0.9 -1.2 -1.2 0.3 -0.2 -1.4
Czechia -1.0 -1.8 1.0 -1.2 -12.3 8.2 3.9 2.7 1.6 13.7 11.1 11.2
Denmark 19.0 23.0 22.6 30.0 44.6 37.0 51.7 57.1 58.4 41.3 41.2 41.6
Hungary 0.0 -1.1 -1.1 -6.1 -14.3 0.9 5.0 4.2 3.5 4.4 2.5 2.3
Poland -10.2 -1.6 12.3 -8.2 -19.1 13.6 1.7 8.9 6.6 5.5 4.0 3.4
Romania -9.7 -11.3 -11.3 -17.6 -27.0 -23.6 -30.2 -30.2 -28.8 -29.6 -29.3 -29.0
Sweden 8.7 23.6 27.1 33.8 23.2 36.5 39.7 40.4 43.5 36.6 36.6 39.2
EU 429.1 398.0 325.7 478.6 136.0 448.5 569.3 552.3 572.9 641.9 628.3 644.0
EU, adjusted 2)
383.4 344.7 306.6 421.9 19.5 326.9 493.5 476.5 497.0 535.7 522.1 537.7
United Kingdom -95.5 -68.4 -69.4 -11.6 -62.3 -109.4 -89.4 -90.3 -91.7 -78.0 -80.2 -83.7
Japan 149.6 157.8 131.3 165.3 82.9 148.8 178.4 171.2 168.7 163.7 173.7 183.8
United States -373.7 -399.6 -501.9 -743.7 -970.6 -847.1 -1004.9 -978.6 -934.5 -946.0 -932.1 -946.9
1) See note 7 on concepts and sources; 2) See note 8 on concepts and sources.

213
European Economic Forecast, Spring 2025

Table 51: Export markets (a) (percentage change on preceding year, 2018-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
2018 2019 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium 4.2 3.4 -8.6 9.4 8.0 0.1 1.3 1.8 2.2 0.6 2.6 3.1
Germany 4.4 2.1 -8.1 11.2 7.4 0.2 1.5 1.8 2.2 1.4 2.9 3.1
Estonia 5.3 3.0 -6.3 10.7 8.3 -0.6 1.0 2.2 2.5 0.7 2.9 3.0
Ireland 4.4 1.5 -8.9 11.0 7.4 0.1 2.0 1.7 1.9 1.7 2.7 3.0
Greece 4.1 2.4 -8.8 11.1 9.8 0.9 2.0 2.3 2.6 1.8 3.1 3.4
Spain 3.8 2.4 -9.6 10.3 8.8 0.6 1.4 1.9 2.3 0.9 2.7 3.2
France 4.0 2.6 -8.7 10.6 7.8 0.3 1.8 1.8 2.2 1.4 2.8 3.1
Croatia 5.1 3.1 -8.8 12.4 8.9 -0.8 1.4 1.8 2.6 0.9 3.0 3.4
Italy 4.1 2.3 -8.7 10.6 7.8 0.7 1.7 1.8 2.2 1.6 2.8 3.1
Cyprus 5.1 2.9 -8.1 10.8 6.9 2.2 2.7 2.4 2.7 2.1 3.3 3.3
Latvia 5.7 3.9 -6.0 12.6 7.2 0.2 1.9 2.5 2.7 1.4 3.1 3.2
Lithuania 5.4 3.1 -6.6 11.0 7.0 1.2 1.5 2.1 2.5 0.9 2.9 3.1
Luxembourg 3.9 2.2 -9.6 10.2 8.2 -0.4 0.8 1.5 2.1 0.2 2.3 2.9
Malta 4.5 2.5 -8.7 10.1 8.3 0.2 1.8 2.0 2.4 1.5 2.9 3.3
Netherlands 4.0 2.8 -8.8 10.4 8.1 -0.5 1.0 1.5 2.1 0.6 2.5 3.0
Austria 4.6 2.8 -8.0 10.6 7.7 -0.2 1.3 1.6 2.1 0.8 2.7 3.2
Portugal 3.8 2.6 -10.5 10.4 8.3 0.1 1.7 2.0 2.2 1.2 2.6 3.1
Slovakia 5.1 2.7 -7.8 11.3 7.4 -0.2 0.9 1.6 2.4 0.5 2.8 3.3
Slovenia 4.5 2.5 -7.7 11.4 9.1 -0.2 1.0 2.0 2.4 1.1 2.9 3.2
Finland 4.6 2.2 -7.5 11.2 7.4 0.4 1.9 1.8 2.0 1.4 2.7 3.0
Euro area b) 4.2 2.4 -8.6 10.7 7.8 0.2 1.5 1.8 2.2 1.2 2.7 3.1
Bulgaria 5.1 2.9 -7.4 11.6 7.9 0.9 1.8 2.2 2.7 1.6 3.0 3.4
Czechia 4.9 3.0 -7.8 10.6 7.4 -0.7 1.0 1.6 2.2 0.6 2.6 3.1
Denmark 4.4 2.3 -8.2 10.5 8.0 0.2 2.1 1.9 2.1 1.5 2.7 3.1
Hungary 5.0 2.9 -8.1 11.5 7.7 -0.5 1.4 1.7 2.2 1.0 2.7 3.1
Poland 4.8 3.0 -8.0 10.4 7.3 0.1 1.2 1.8 2.3 0.6 2.6 3.1
Romania 4.4 2.5 -8.3 10.7 8.5 0.0 1.0 1.8 2.4 0.4 2.8 3.3
Sweden 4.4 2.6 -8.2 9.7 8.1 0.0 1.8 2.0 2.2 1.2 2.7 3.0
EU (b) 4.3 2.5 -8.5 10.7 7.8 0.1 1.5 1.8 2.2 1.1 2.7 3.1
United Kingdom 3.8 4.1 -7.8 9.8 7.6 0.7 2.6 2.0 2.1 2.5 3.0 3.2
Japan 5.0 -0.2 -8.4 12.6 5.1 1.2 3.2 1.9 2.2 3.3 3.2 3.3
United States 4.1 2.3 -8.9 10.3 7.3 1.6 2.1 1.5 2.0 2.0 2.7 3.0
(a) Imports of goods and services to the various markets (incl. EU-markets) weighted according to their share in country's exports of goods and services.
(b) Intra- and extra-EU trade.

Table 52: Export performance (a) (percentage change on preceding year, 2018-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
2018 2019 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
Belgium -2.6 -0.4 2.9 4.8 -2.0 -7.0 -4.7 -3.6 -0.3 -2.6 -0.8 -0.5
Germany -1.8 -0.1 -1.5 -1.1 -4.1 -0.5 -2.6 -3.6 -1.1 -1.4 -1.5 -0.5
Estonia -2.3 2.0 2.3 10.3 -2.8 -8.0 -2.0 -0.1 -0.1 -0.8 0.1 0.0
Ireland 0.6 9.0 24.8 2.8 5.9 -6.3 9.2 -0.3 0.6 6.7 -1.4 0.8
Greece 4.9 2.5 -15.5 12.0 -2.9 1.0 -1.0 0.8 0.5 0.5 0.5 0.1
Spain -2.0 -0.1 -11.8 2.8 5.7 2.7 1.9 0.8 -0.1 2.8 0.2 -0.5
France -0.2 -0.5 -8.6 0.7 0.4 1.8 -0.5 -0.7 0.1 0.4 0.2 0.4
Italy -1.9 -1.0 -5.5 3.1 2.0 -0.4 -1.3 -0.9 -0.5 -1.2 -0.5 -0.2
Cyprus 2.0 5.6 10.6 14.8 18.9 -5.0 2.4 1.2 0.9 5.5 0.2 -0.9
Latvia -1.3 -4.3 6.1 -3.1 4.0 -4.9 -3.5 -0.7 -0.7 -3.2 -1.4 -0.8
Lithuania 1.4 6.9 7.0 5.0 5.0 -4.9 0.1 0.8 0.8 2.1 0.3 0.4
Luxembourg -0.3 3.8 12.8 1.0 -6.3 0.1 -0.5 1.6 1.1 0.9 1.7 0.8
Malta 8.4 4.7 16.2 -9.5 5.0 5.5 3.4 1.4 0.5 1.6 0.3 -0.4
Netherlands 1.0 0.0 5.4 -3.2 -3.2 0.0 -0.5 -0.8 -0.3 -0.6 -0.2 -0.5
Austria 0.5 1.2 -2.8 -1.0 2.2 -0.2 -5.5 -2.5 -0.2 -2.8 -0.4 -0.5
Portugal 0.5 1.3 -9.0 1.6 8.5 3.8 1.6 -0.3 0.6 2.6 0.3 0.1
Slovenia 1.6 1.9 -1.0 2.8 -2.1 -1.7 2.1 0.3 0.6 -0.2 0.2 0.2
Slovakia 0.3 -1.3 1.5 -0.6 -4.3 -0.6 -0.6 0.2 -0.6 1.5 1.0 0.7
Finland -2.7 4.7 -1.3 -4.7 -2.6 -0.4 -1.2 0.8 0.4 -1.4 0.4 -0.2
Euro area (b) -0.8 0.7 -0.3 0.7 -0.3 -0.9 -0.4 -1.4 -0.2 0.2 -0.5 -0.1
Bulgaria -3.1 1.1 -2.4 0.0 4.2 -0.5 -2.6 -0.6 -0.7 -0.9 0.0 -0.4
Czechia -1.3 -1.6 -0.8 -2.2 -2.0 3.5 0.8 -0.5 0.2 0.4 -0.3 -0.2
Denmark -0.8 2.0 1.9 -1.6 -0.9 9.3 5.4 3.6 0.4 3.2 -0.7 -0.6
Croatia -1.4 3.7 -16.5 18.1 16.7 -1.8 -0.6 0.5 0.0 -0.5 -0.1 -0.2
Hungary -0.1 2.5 2.2 -2.9 2.8 2.3 -4.3 -1.5 0.5 -2.7 -0.2 2.1
Poland 1.9 2.3 7.5 1.7 0.2 3.5 0.8 -0.2 0.1 0.3 -0.2 -0.1
Romania 0.8 2.8 -1.3 1.8 1.0 -0.7 -4.2 -0.1 0.4 -2.4 -0.6 -0.8
Sweden 0.1 4.3 2.9 2.0 -1.6 4.0 0.7 0.0 -0.3 0.6 -0.8 -0.2
EU (b) -0.7 0.9 0.2 0.6 -0.3 -0.1 -0.2 -1.1 -0.2 0.2 -0.5 -0.1
United Kingdom -0.7 -2.0 -4.3 -6.0 4.6 -0.7 -3.3 -1.5 -0.6 -3.8 -2.1 -1.9
Japan -1.2 -1.2 -3.5 -0.6 0.4 1.9 -2.1 -0.1 -0.9 -3.0 -0.7 -1.1
United States -1.3 -1.8 -4.7 -3.5 0.3 1.2 1.1 0.2 -0.4 1.2 0.2 0.1
(a) Index for exports of goods and services divided by an index for growth of markets.
(b) Intra- and extra-EU trade.

214
 Statistical Annex

Table 53: World GDP, volume (percentage change on preceding year, 2020-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
(a) 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
EU 14.3 -5.6 6.3 3.5 0.5 1.0 1.1 1.5 0.9 1.5 1.8
Euro area 11.6 -6.0 6.3 3.5 0.4 0.9 0.9 1.4 0.8 1.3 1.6
Belgium 0.4 -4.8 6.2 4.3 1.2 1.0 0.8 0.9 1.1 1.2 1.5
Bulgaria 0.1 -3.2 7.8 4.0 1.9 2.8 2.0 2.1 2.4 2.9 3.0
Czechia 0.3 -5.3 4.0 2.8 -0.1 1.1 1.9 2.1 1.0 2.4 2.7
Denmark 0.3 -1.8 7.4 1.5 2.5 3.7 3.6 2.0 2.4 2.5 1.8
Germany 3.1 -4.1 3.7 1.4 -0.3 -0.2 0.0 1.1 -0.1 0.7 1.3
Estonia 0.0 -2.9 7.2 0.1 -3.0 -0.3 1.1 2.3 -1.0 1.1 2.6
Ireland 0.4 7.2 16.3 8.6 -5.5 1.2 3.4 2.5 -0.5 4.0 3.6
Greece 0.2 -9.2 8.7 5.7 2.3 2.3 2.3 2.2 2.1 2.3 2.2
Spain 1.4 -10.9 6.7 6.2 2.7 3.2 2.6 2.0 3.0 2.3 2.1
France 2.2 -7.4 6.9 2.6 0.9 1.2 0.6 1.3 1.1 0.8 1.4
Croatia 0.1 -8.3 12.6 7.3 3.3 3.9 3.2 2.9 3.6 3.3 2.9
Italy 1.8 -8.9 8.9 4.8 0.7 0.7 0.7 0.9 0.7 1.0 1.2
Cyprus 0.0 -3.2 11.4 7.2 2.8 3.4 3.0 2.5 3.6 2.8 2.5
Latvia 0.0 -3.5 6.9 1.8 2.9 -0.4 0.5 2.0 0.0 1.0 2.1
Lithuania 0.1 0.0 6.4 2.5 0.3 2.8 2.8 3.1 2.2 3.0 3.0
Luxembourg 0.1 -0.5 6.9 -1.1 -0.7 1.0 1.7 2.0 1.2 2.3 2.2
Hungary 0.2 -4.3 7.2 4.3 -0.8 0.5 0.8 2.5 0.6 1.8 3.1
Malta 0.0 -3.4 13.3 4.3 6.8 6.0 4.1 4.0 5.0 4.3 4.3
Netherlands 0.7 -3.9 6.3 5.0 0.1 1.0 1.3 1.2 0.8 1.6 1.5
Austria 0.3 -6.3 4.8 5.3 -1.0 -1.2 -0.3 1.0 -0.6 1.0 1.4
Poland 1.0 -2.0 6.9 5.3 0.2 2.9 3.3 3.0 3.0 3.6 3.1
Portugal 0.3 -8.2 5.6 7.0 2.6 1.9 1.8 2.2 1.7 1.9 2.1
Romania 0.5 -3.7 5.5 4.0 2.4 0.8 1.4 2.2 1.4 2.5 2.9
Slovenia 0.1 -4.1 8.4 2.7 2.1 1.6 2.0 2.4 1.4 2.5 2.6
Slovakia 0.1 -2.6 5.7 0.4 2.2 2.1 1.5 1.4 2.2 2.3 2.5
Finland 0.2 -2.5 2.7 0.8 -0.9 -0.1 1.0 1.3 -0.3 1.5 1.6
Sweden 0.4 -2.0 5.9 1.5 -0.1 1.0 1.1 1.9 0.3 1.8 2.6
Candidate Countries 2.4 0.2 9.6 -1.4 5.0 3.3 2.7 3.7 3.2 3.2 4.3
- Albania 0.0 -3.3 9.0 4.8 3.9 4.0 3.6 3.5 3.8 3.6 3.5
- Bosnia and Herzegovina 0.0 -3.0 7.4 4.2 2.0 2.5 2.0 2.3 2.3 2.4 3.0
- Georgia 0.1 -6.3 10.6 11.0 7.8 9.4 6.0 5.2 8.5 5.8 5.3
- Moldova 0.0 -8.3 13.9 -4.6 1.2 0.1 0.9 2.8 2.6 3.8 4.2
- Montenegro 0.0 -15.3 13.0 6.4 6.3 3.0 3.0 3.2 3.9 4.2 3.0
- North Macedonia 0.0 -4.7 4.5 2.8 2.1 2.8 3.0 3.1 2.0 2.6 2.9
- Serbia 0.1 -1.0 7.9 2.6 3.8 3.9 3.2 3.8 3.9 4.2 4.3
- Türkiye 1.8 1.9 11.4 5.5 5.1 3.2 2.8 3.5 3.0 3.2 4.0
- Ukraine 0.3 -3.8 3.4 -28.8 5.5 2.9 2.0 4.7 3.5 2.8 5.9
Iceland 0.0 -6.9 5.0 9.0 5.6 0.5 1.7 2.7 1.1 2.5 2.4
Norway 0.3 -1.3 3.9 3.2 0.1 2.1 1.5 1.4 1.0 1.5 1.8
Switzerland 0.4 -2.1 5.6 3.0 0.7 1.3 0.8 1.5 1.8 1.5 2.0
Australia 1.0 -2.0 5.4 4.1 2.0 1.1 1.9 2.0 1.4 2.0 2.2
Canada 1.3 -5.0 6.0 4.2 1.5 1.5 1.2 1.3 1.2 2.0 2.1
Japan 3.3 -4.2 2.7 0.9 1.5 0.1 0.7 0.6 0.2 1.2 1.0
Korea 1.7 -0.7 4.6 2.7 1.4 2.0 1.1 1.5 2.3 2.1 2.5
United Kingdom 2.2 -10.3 8.6 4.8 0.4 1.1 1.0 1.3 1.0 1.4 1.4
United States 14.9 -2.2 6.1 2.5 2.9 2.8 1.6 1.6 2.7 2.1 2.2
Advanced economies 43.7 -3.8 6.2 2.8 1.8 1.9 1.5 1.7 1.8 1.9 2.1
Emerging and Developing Asia 35.6 -0.9 7.5 4.6 5.8 5.2 4.7 4.7 5.3 5.1 5.0
- China 19.5 2.3 8.6 3.1 5.4 5.0 4.1 4.0 4.9 4.6 4.4
- India 8.3 -5.8 9.7 7.6 9.2 6.5 6.4 6.4 7.2 6.9 6.7
- Indonesia 2.4 -2.1 3.7 5.3 5.0 5.0 5.0 5.5 5.0 5.2 5.1
Eastern Neighbourhood and Central Asia 1.1 -1.8 4.6 3.4 4.6 4.9 4.3 3.8 4.1 4.1 3.5
Russia 3.5 -2.7 5.9 -1.4 4.1 4.3 1.7 1.2 3.5 1.8 1.6
Latin America 7.3 -7.1 7.4 4.0 2.3 2.1 1.8 1.8 1.8 2.4 2.6
- Argentina 0.7 -9.9 10.4 5.3 -1.6 -1.7 5.0 3.4 -3.5 3.8 2.9
- Brazil 2.4 -3.3 4.8 3.0 3.2 3.4 2.0 1.5 3.1 2.3 2.4
- Mexico 1.7 -8.4 6.0 3.7 3.3 1.5 -0.6 0.5 1.4 1.4 2.2
MENA 5.5 -2.2 4.6 5.9 2.1 2.2 3.2 3.7 2.3 3.7 3.5
- Saudi Arabia 1.1 -3.6 5.1 7.5 -0.8 1.3 3.1 3.8 1.4 4.5 4.0
Sub-Saharan Africa 3.3 -2.0 4.3 3.6 2.5 2.9 3.7 4.1 2.9 4.1 4.5
- South Africa 0.5 -6.2 5.0 1.9 0.7 0.6 1.4 1.5 1.1 1.6 1.7
Emerging and Developing Economies 56.3 -2.1 6.8 4.2 4.6 4.3 3.9 4.0 4.3 4.4 4.3
World 100.0 -2.9 6.5 3.5 3.4 3.3 2.9 3.0 3.2 3.3 3.3
World excluding EU 85.6 -2.4 6.6 3.5 3.9 3.6 3.1 3.2 3.5 3.6 3.6
World excluding euro area 88.4 -2.4 6.6 3.5 3.8 3.6 3.1 3.2 3.5 3.6 3.6
(a) Relative weights in %, based on GDP (at constant prices and PPS) in 2024.

215
European Economic Forecast, Spring 2025

Table 54: World exports of goods and services, volume (percentage change on preceding year, 2020-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
(a) 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
EU (b) 31.1 -8.2 11.3 7.4 0.1 1.2 0.7 2.1 1.4 2.2 3.0
Euro area (20) (b) 25.7 -8.7 11.5 7.4 -0.8 1.1 0.3 2.0 1.5 2.2 3.0
Candidate Countries 1.7 -13.3 18.6 2.0 -2.0 1.9 1.7 4.7 2.9 3.8 5.6
- Albania 0.0 -27.7 52.1 17.0 9.5 -0.8 3.6 3.6 4.0 5.2 4.9
- Bosnia and Herzegovina 0.0 -14.8 25.4 11.8 -1.2 -3.1 2.4 2.8 0.0 3.3 3.4
- Georgia 0.1 -37.6 23.5 37.4 9.5 5.9 6.4 5.4 6.9 6.9 5.4
- Moldova 0.0 -14.9 17.5 29.7 4.8 -5.2 3.9 5.4 0.5 6.0 7.0
- Montenegro 0.0 -47.6 81.9 22.7 9.0 -3.2 -0.1 3.3 3.4 4.2 4.3
- North Macedonia 0.0 -10.9 14.3 10.6 -0.6 -3.8 2.8 3.9 2.6 3.0 3.1
- Serbia 0.1 -4.6 20.4 17.0 2.7 3.2 3.0 4.4 4.2 4.6 4.9
- Türkiye 1.2 -14.6 25.1 9.9 -2.8 0.9 1.2 3.9 2.0 3.2 5.1
- Ukraine 0.2 -5.8 -8.6 -42.0 -5.9 10.3 1.8 11.4 7.7 5.5 10.7
Iceland 0.0 -30.7 14.8 22.1 6.3 -1.2 2.0 2.8 1.2 3.9 3.8
Norway 0.7 -2.3 6.1 5.2 0.4 5.7 1.2 1.4 2.9 1.9 2.4
Switzerland 2.1 -5.2 13.7 6.1 0.7 -0.3 1.9 2.5 3.0 2.0 3.2
Australia 1.3 -9.6 -2.3 2.6 6.9 2.0 2.2 2.5 2.0 3.6 2.6
Canada 2.3 -9.0 3.3 4.2 4.9 1.1 -0.2 -0.8 1.1 1.2 1.2
Japan 2.9 -11.6 11.9 5.5 3.0 1.0 1.8 1.3 0.2 2.5 2.2
Korea 2.6 -1.7 10.8 3.9 3.6 6.9 1.4 2.0 6.6 1.8 3.4
United Kingdom 3.5 -11.8 3.2 12.6 -0.4 -1.2 0.4 1.5 -1.6 0.9 1.3
United States 10.1 -13.1 6.5 7.5 2.8 3.3 1.7 1.6 3.3 2.9 3.1
Advanced economies 65.6 -8.6 10.0 6.0 1.0 1.9 1.1 2.0 2.0 2.4 2.9
Emerging and Developing Asia 19.3 -5.0 18.8 2.5 1.5 8.1 2.2 2.0 6.5 4.3 3.6
- China 12.0 -3.2 18.5 -0.2 1.8 11.1 1.2 0.4 8.4 4.2 2.9
- India 2.6 -7.0 29.6 10.3 2.2 4.9 5.4 6.0 5.4 6.0 6.2
- Indonesia 1.0 -9.1 20.5 0.9 4.4 0.6 3.5 5.6 0.6 4.0 6.0
Easter Neighbourhood and Central Asia 0.8 -9.8 2.5 7.8 12.0 5.2 3.9 3.9 5.2 6.2 4.1
Russia 1.5 -4.2 3.2 -13.8 -11.0 3.0 0.5 0.0 0.0 3.5 2.5
Latin America 5.4 -9.4 7.7 7.6 -1.2 3.4 0.5 0.9 2.7 3.6 3.4
- Argentina 0.3 -12.8 12.6 -5.2 -13.4 19.4 4.6 3.5 18.9 3.7 4.3
- Brazil 1.2 -1.3 2.3 6.1 9.4 4.6 3.1 2.6 4.2 4.1 4.1
- Mexico 2.2 -7.0 7.1 9.5 -7.2 0.6 -3.0 -2.1 -0.7 3.2 2.8
MENA 6.0 -10.1 5.0 12.6 3.6 2.7 5.1 5.3 1.3 6.2 5.4
- Saudi Arabia 1.1 -14.5 5.7 24.5 -1.6 3.1 7.1 8.3 0.7 10.6 9.1
Sub-Saharan Africa 1.4 -10.1 -0.8 4.6 0.6 4.6 3.9 4.8 3.8 5.0 6.4
- South Africa 0.4 -12.0 9.7 6.8 3.7 2.3 1.3 1.9 2.3 3.7 3.9
Emerging and developing economies 34.4 -6.9 13.2 4.1 1.0 5.9 2.5 2.5 4.5 4.6 4.0
World 100.0 -8.1 11.1 5.3 1.0 3.3 1.6 2.2 2.9 3.1 3.3
World excluding EU 68.9 -8.0 10.9 4.4 1.4 4.2 2.0 2.2 3.5 3.5 3.4
World excluding euro area 74.3 -7.8 10.9 4.6 1.6 4.0 2.0 2.2 3.4 3.4 3.4
(a) Relative weights in %, based on exports of goods and services (at current prices and current exchange rates) in 2024.
(b) Intra- and extra-EU trade.

Table 55: Shares of main trading partners in goods export of EU and Member States (2023) 30.04.2025
EU Euro Area Candidate USA United Japan Other China Rest of Asia Russia MENA Latin Sub-
Countries Kingdom Advanced America Saharan
Economies Africa
EU 61.3 49.0 2.9 7.8 5.3 1.0 7.5 3.7 1.0 0.6 3.1 2.5 1.2
Euro area 59.3 47.8 2.6 8.5 5.6 1.1 7.9 4.0 1.1 0.6 3.2 2.6 1.3
Belgium 69.7 61.7 1.5 5.3 6.2 0.8 4.3 1.5 0.7 0.4 2.6 2.3 2.6
Bulgaria 64.3 45.1 13.6 2.8 1.6 0.2 3.2 2.8 0.8 0.9 5.7 0.7 0.6
Czechia 80.2 65.3 3.1 2.7 3.1 0.5 3.5 1.6 0.4 0.5 1.5 1.1 0.4
Denmark 57.7 38.4 1.6 8.4 5.2 1.6 10.9 4.2 1.5 0.3 2.5 3.4 0.8
Germany 55.0 38.6 2.8 9.7 5.2 1.3 9.6 6.2 1.3 0.7 2.4 2.9 0.9
Estonia 73.7 56.2 2.4 3.3 2.1 0.8 7.6 1.6 0.5 2.1 1.1 1.2 0.6
Ireland 39.6 36.4 0.6 28.2 9.9 2.1 5.6 5.5 2.1 0.3 1.6 2.0 0.5
Greece 52.3 39.2 10.9 3.9 3.8 1.0 4.0 1.1 1.4 0.3 12.7 1.4 1.3
Spain 62.4 55.9 2.8 5.3 5.9 1.0 5.1 2.1 0.8 0.4 5.6 5.1 1.3
France 53.6 46.9 2.4 7.9 6.7 1.3 9.8 4.9 1.4 0.6 4.8 2.4 1.8
Croatia 67.2 53.2 16.9 3.2 1.6 0.3 2.9 0.5 0.6 1.2 1.9 0.6 1.5
Italy 50.6 41.6 3.7 10.9 4.3 1.5 10.4 3.6 1.2 0.9 5.7 3.4 1.1
Cyprus 31.0 24.1 0.9 2.0 5.3 0.0 5.2 0.6 7.4 0.3 27.4 8.9 5.2
Latvia 66.0 50.6 3.8 2.7 4.8 0.3 4.1 1.1 0.4 6.0 1.2 0.7 4.1
Lithuania 63.3 44.6 5.1 5.1 4.0 0.3 5.3 0.4 0.6 3.3 2.3 1.1 2.2
Luxembourg 76.0 68.9 1.8 3.2 3.4 0.4 6.4 1.3 0.5 0.2 2.1 1.9 0.9
Hungary 75.7 58.5 5.1 4.9 2.8 0.7 3.2 2.0 0.5 0.7 1.3 1.7 0.3
Malta 39.7 34.5 1.1 3.1 2.7 3.3 14.9 5.8 1.0 0.2 4.3 2.3 20.3
Netherlands 71.3 60.9 1.2 4.7 6.8 0.5 5.6 2.4 0.6 0.3 1.8 1.7 1.4
Austria 68.3 53.5 2.2 7.6 2.6 0.9 8.5 2.9 0.8 0.6 1.6 2.1 0.6
Poland 74.9 59.5 4.7 3.4 4.9 0.3 3.6 1.1 0.4 0.9 1.6 1.4 0.8
Portugal 65.8 60.4 1.9 7.2 4.8 0.6 5.2 2.2 0.3 0.2 3.8 2.7 3.9
Romania 68.7 52.5 9.1 3.1 3.8 1.1 3.1 1.8 0.7 0.5 5.0 1.1 0.4
Slovenia 59.8 45.9 6.2 3.5 1.2 0.4 22.7 0.7 0.4 1.2 1.6 0.6 0.2
Slovakia 74.7 44.1 3.5 5.7 3.3 0.4 3.4 4.4 0.1 0.6 1.9 1.0 0.3
Finland 55.6 38.7 2.2 9.8 3.4 1.7 9.7 5.2 1.4 1.6 2.2 2.9 1.3
Sweden 55.8 42.6 1.8 9.0 5.1 1.2 13.2 4.2 0.9 0.6 2.7 2.6 1.0

216
 Statistical Annex

Table 56: World imports of goods and services, volume (percentage change on preceding year, 2020-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
(a) 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
EU (b) 29.4 -7.6 9.6 8.3 -1.3 0.6 1.7 2.3 0.2 2.6 3.0
Euro area (b) 24.2 -8.2 9.0 8.4 -1.4 0.3 1.6 2.2 0.0 2.5 3.0
Candidate Countries 1.9 0.6 7.0 5.1 9.0 -0.3 2.3 4.0 0.9 3.4 4.9
- Albania 0.0 -19.8 32.5 11.5 0.2 6.0 5.0 3.4 6.3 4.7 4.2
- Bosnia and Herzegovina 0.1 -13.4 20.6 6.2 -1.3 2.8 2.2 3.1 2.3 4.0 2.5
- Georgia 0.1 -16.6 8.8 16.9 10.0 8.5 7.4 5.8 9.6 6.2 5.0
- Moldova 0.0 -9.5 21.2 18.2 -5.1 5.1 6.0 5.3 1.7 3.4 3.8
- Montenegro 0.0 -20.1 13.7 21.3 5.9 5.5 4.4 4.0 3.5 4.4 4.0
- North Macedonia 0.0 -10.9 14.8 13.6 -5.8 -0.6 3.7 4.2 3.5 4.3 4.1
- Serbia 0.2 -4.0 17.7 16.2 -1.6 8.3 4.8 5.5 7.2 5.7 5.9
- Türkiye 1.2 6.8 1.7 8.6 11.8 -4.1 0.6 3.3 -2.2 2.3 4.7
- Ukraine 0.3 -6.4 14.2 -17.4 8.9 7.7 5.5 6.0 7.3 5.8 5.8
Iceland 0.0 -20.6 20.5 20.1 -1.0 2.7 4.2 1.4 2.7 2.9 3.1
Norway 0.5 -9.9 1.8 13.3 -1.5 3.7 2.0 2.5 1.3 2.6 3.4
Switzerland 1.9 -3.2 5.8 5.8 2.7 0.4 2.3 2.2 2.4 2.3 3.1
Australia 1.3 -12.0 5.3 13.7 6.8 4.8 1.9 2.8 4.8 2.2 3.0
Canada 2.4 -9.4 8.3 7.5 0.4 0.6 -0.6 -0.8 0.6 1.1 1.1
Japan 3.1 -6.8 5.2 8.3 -1.5 1.3 1.6 1.3 0.0 2.7 2.2
Korea 2.5 -3.3 10.2 4.2 3.5 2.4 1.7 2.1 2.5 2.8 2.4
United Kingdom 3.8 -15.9 5.8 13.0 -1.2 2.7 1.6 1.5 0.9 0.6 1.5
United States 13.4 -9.0 14.7 8.6 -1.2 5.3 1.4 -0.3 5.6 3.3 2.9
Advanced economies 66.7 -7.8 10.2 7.4 -0.5 2.1 1.7 1.9 1.9 2.6 2.9
Emerging and Developing Asia 18.4 -9.0 14.1 1.3 5.0 3.7 2.2 3.3 3.9 4.0 3.9
- China 10.6 -7.4 11.1 -3.0 6.3 3.3 0.4 1.9 3.3 3.0 3.0
- India 3.0 -12.6 22.1 8.9 13.8 5.9 6.6 6.4 7.1 7.6 6.2
- Indonesia 0.9 -14.5 14.2 8.3 -3.1 4.8 4.5 5.7 4.8 5.4 6.1
Eastern Neighbourhood and Central Asia 0.8 -16.9 -2.9 8.9 23.8 5.8 3.2 3.8 5.6 5.0 3.8
Russia 1.3 -11.9 19.1 -14.3 13.0 0.0 1.0 2.0 -0.5 3.7 2.3
Latin America 5.7 -12.3 18.5 7.1 1.2 1.4 1.3 1.6 1.3 3.3 3.3
- Argentina 0.3 -10.3 29.7 12.7 5.8 -12.9 6.9 4.1 -15.3 6.7 4.1
- Brazil 1.2 -8.5 16.7 0.7 0.8 2.9 2.5 1.9 1.4 2.6 2.5
- Mexico 2.3 -12.0 15.7 8.6 3.7 2.0 -1.6 -0.6 2.6 2.1 2.8
MENA 5.7 -15.5 7.4 11.6 6.4 3.0 3.1 3.7 3.0 4.1 4.0
- Saudi Arabia 1.1 -16.6 5.0 10.6 15.2 7.6 4.4 5.5 5.2 8.2 5.6
Sub-Saharan Africa 1.5 -11.6 -0.4 9.6 -2.8 5.0 4.2 5.2 4.1 5.8 6.5
- South Africa 0.4 -17.6 9.6 15.0 3.9 3.8 2.8 3.0 2.8 4.3 4.6
Emerging and Developing Economies 33.3 -11.1 12.9 3.6 4.9 3.2 2.2 3.1 3.2 4.0 3.9
World 100.0 -8.8 11.0 6.2 1.3 2.4 1.9 2.3 2.3 3.1 3.2
World excluding EU 70.6 -9.4 11.7 5.2 2.4 3.2 2.0 2.2 3.2 3.3 3.3
World excluding euro area 75.8 -9.1 11.7 5.4 2.2 3.1 2.0 2.3 3.1 3.3 3.3
(a) Relative weights in %, based on imports of goods and services (at current prices and current exchange rates) in 2024.
(b) Intra- and extra-EU trade.

Table 57: Shares of main trading partners in goods imports of EU and member states (2023) 30.04.2025
EU Euro Area Candidate USA United Japan Other China Rest of Asia Russia MENA Latin Sub-
Countries Kingdom Advanced America Saharan
Economies Africa
EU 61.7 49.2 2.4 5.2 3.0 1.1 7.0 7.5 2.0 1.5 3.0 1.8 1.3
Euro area 60.1 48.2 2.1 5.8 3.3 1.1 7.1 7.5 2.1 1.5 3.4 2.0 1.5
Belgium 62.5 56.3 1.1 7.1 3.9 1.6 6.8 6.1 1.7 1.0 2.4 1.9 1.6
Bulgaria 62.4 43.3 13.8 1.0 0.9 0.3 2.7 5.2 1.0 5.9 1.6 2.0 0.6
Czechia 74.8 57.8 2.2 1.9 1.3 1.1 3.4 9.9 1.6 1.2 0.3 0.4 0.2
Denmark 65.8 46.8 1.3 4.3 2.4 0.5 12.2 6.4 1.9 0.9 0.4 1.8 0.3
Germany 65.6 45.9 2.2 5.2 2.5 1.3 8.2 6.8 2.2 0.8 1.4 1.4 0.9
Estonia 77.9 59.0 1.2 1.3 1.2 0.6 2.7 3.6 0.6 7.8 0.4 0.4 0.6
Ireland 39.9 35.7 0.7 14.6 23.1 1.4 7.1 5.2 1.6 0.2 0.8 1.3 0.4
Greece 47.9 38.5 5.5 1.9 1.4 0.4 3.5 11.1 0.9 4.1 13.1 1.6 0.9
Spain 56.1 48.9 2.8 5.5 2.5 0.8 3.9 8.5 2.4 0.7 6.3 4.9 2.8
France 65.2 57.5 1.5 5.8 3.5 0.8 6.0 5.5 1.5 0.8 4.7 1.1 1.6
Croatia 73.7 58.1 8.4 2.5 0.4 0.2 1.6 4.4 0.5 1.9 0.9 0.7 1.5
Italy 56.2 46.9 3.0 4.3 1.7 0.9 6.3 7.4 1.9 1.8 7.5 1.7 1.4
Cyprus 60.9 55.0 2.7 1.2 7.1 4.1 4.6 6.4 1.4 0.4 2.7 2.2 0.3
Latvia 73.4 56.6 2.4 2.2 1.3 0.1 4.0 3.4 1.4 7.3 0.3 1.1 0.5
Lithuania 67.3 45.7 2.4 6.1 1.9 0.2 6.1 3.9 0.6 5.7 3.3 0.4 0.2
Luxembourg 85.2 80.7 0.9 5.2 1.6 1.7 2.5 1.2 0.5 0.0 0.3 0.2 0.3
Hungary 72.0 55.2 3.8 1.8 1.0 1.2 7.2 7.2 1.4 2.7 0.3 0.4 0.1
Malta 42.5 40.5 5.1 2.3 3.1 1.0 11.9 7.4 1.0 5.2 15.5 1.8 0.2
Netherlands 41.8 35.2 1.1 9.8 4.3 1.6 9.1 13.6 3.9 2.3 2.4 3.8 2.8
Austria 77.8 63.9 2.2 2.5 1.0 0.7 6.8 2.8 1.6 1.8 1.1 0.3 0.1
Poland 66.5 54.4 3.0 2.8 1.7 0.9 6.2 9.1 1.6 2.3 2.9 1.2 0.4
Portugal 73.6 68.3 1.5 2.1 1.3 0.5 3.7 5.0 1.0 0.5 2.2 4.1 2.6
Romania 71.2 50.7 9.5 1.0 1.0 0.4 2.5 5.6 0.7 1.0 2.1 0.6 0.2
Slovenia 49.7 40.9 7.5 0.5 0.4 0.3 22.7 12.1 0.8 0.2 1.9 0.9 0.2
Slovakia 80.4 42.8 2.6 0.5 1.2 0.1 4.4 4.0 1.6 4.0 0.5 0.1 0.0
Finland 67.4 42.6 1.0 3.5 1.9 0.5 10.3 4.2 0.9 7.1 0.4 1.8 0.2
Sweden 68.7 54.0 1.2 4.0 3.2 0.8 11.9 5.2 1.6 0.2 0.7 0.9 0.7

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European Economic Forecast, Spring 2025

Table 58: World merchandise trade balances (fob-fob, in billions of US dollar, 2019-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
2019 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
EU 396.5 452.0 386.1 4.8 387.6 497.4 533.9 562.7 530.5 530.4 539.8
1)
EU, adjusted 333.6 396.5 317.5 -132.2 293.9 415.8 449.9 477.1 365.5 367.0 375.0
Euro area 379.9 414.9 383.8 51.8 343.4 449.7 471.8 499.0 480.1 485.2 494.9
Euro area, adjusted1) 351.7 390.2 345.4 -48.0 284.9 402.5 423.2 449.5 352.2 358.0 366.2
Candidate Countries -57.1 -67.7 -65.0 -140.8 -151.0 -126.7 -136.9 -157.7 -136.3 -163.7 -186.5
- Albania -3.5 -3.4 -4.5 -4.5 -4.9 -6.0 -6.7 -7.3 -5.9 -6.4 -6.9
- Bosnia and Herzegovina -4.6 -3.7 -4.3 -5.5 -5.7 -6.5 -6.9 -7.4 -6.2 -6.6 -6.8
- Georgia -3.8 -3.2 -3.8 -5.1 -6.1 -6.5 -7.2 -8.2 -6.3 -6.9 -7.5
- Moldova -3.3 -3.1 -4.2 -5.2 -4.9 -5.6 -6.4 -7.1 -5.1 -5.2 -5.3
- Montenegro -2.3 -1.9 -2.3 -2.8 -3.2 -3.5 -3.9 -4.2 -3.5 -3.7 -3.9
- North Macedonia -2.2 -2.1 -2.8 -3.7 -2.8 -3.3 -3.8 -4.1 -3.2 -3.5 -3.9
- Serbia -6.3 -5.8 -6.7 -9.5 -6.9 -8.5 -10.1 -11.8 -8.0 -9.1 -10.3
- Türkiye -16.8 -37.9 -29.7 -90.0 -87.4 -56.2 -57.4 -71.4 -66.5 -85.0 -103.0
- Ukraine -14.3 -6.7 -6.6 -14.7 -29.2 -30.4 -34.4 -36.3 -31.6 -37.3 -38.8
- Iceland -0.8 -0.6 -1.0 -1.5 -2.1 -2.3 -2.8 -3.0 -2.4 -2.7 -2.8
- Norway 16.3 -1.0 72.4 166.9 78.1 70.9 71.5 73.3 81.5 82.8 85.7
- Switzerland 71.4 63.4 116.1 120.7 124.8 126.2 129.7 134.9 124.4 132.7 139.6
Australia 47.6 39.8 86.1 112.2 83.7 45.2 44.8 43.1 81.5 84.4 84.1
Canada -14.2 -30.3 3.0 16.7 -0.5 -5.0 -16.4 -17.0 7.0 8.4 9.2
Japan 1.4 26.0 16.0 -118.3 -46.3 -25.8 -36.5 -40.7 -31.1 -37.7 -42.7
Korea 79.8 80.6 75.7 15.6 37.7 100.1 97.6 89.5 69.8 62.9 71.9
United -185.0 -164.3 -223.1 -254.8 -259.3 -288.9 -315.2 -327.3 -255.7 -265.5 -272.6
Kingdom
United States -871.9 -883.4 -1092.4 -1191.9 -1074.2 -1201.9 -1212.3 -1185.3 -1201.5 -1254.0 -1296.0
Advanced economies -381.6 -310.9 -418.0 -1054.8 -592.3 -569.1 -625.8 -639.0 -491.1 -565.8 -614.3
Emerging and Developing Asia 260.0 501.3 448.4 473.0 418.0 554.3 416.2 295.0 372.9 342.9 328.5
- China 393.0 511.1 562.7 665.0 593.9 767.9 663.0 567.2 581.5 577.5 572.0
- India -157.5 -102.2 -189.5 -265.3 -244.9 -269.5 -283.3 -298.0 -261.1 -282.0 -291.7
- Indonesia 3.5 28.3 43.8 62.7 46.3 39.9 35.4 37.7 37.8 37.7 41.9
Eastern Neighbourhood and Central Asia 16.8 -0.7 25.8 50.9 7.8 4.7 0.1 0.4 8.8 9.2 9.0
Russia 165.9 92.7 192.6 309.2 121.9 133.3 126.1 116.9 121.6 114.9 124.9
Latin America 22.8 75.9 20.7 -23.4 42.0 26.4 -6.3 -23.9 46.6 34.9 24.0
- Argentina 18.2 14.6 18.7 12.4 -2.9 22.4 21.6 21.1 19.1 17.5 17.5
- Brazil 29.6 35.7 42.3 51.5 92.3 65.8 56.1 54.9 85.8 86.5 85.1
- Mexico 5.2 34.2 -10.7 -27.1 -5.5 -8.2 -23.7 -33.2 -13.7 -13.8 -14.5
MENA 234.8 70.8 302.0 546.0 310.2 212.2 169.6 148.3 225.3 206.3 183.6
- Saudi Arabia 121.3 47.9 136.5 235.3 128.2 90.5 83.7 80.5 105.9 108.5 100.1
Sub-Saharan Africa 5.7 -3.5 34.4 30.9 12.5 20.7 20.9 16.9 12.0 6.3 1.8
- South Africa 2.5 17.7 30.7 13.9 5.6 11.8 11.9 11.4 3.8 2.1 0.1
Emerging and Developing Economies 706.0 736.5 1024.0 1386.6 912.3 951.6 726.6 553.5 787.2 714.4 672.0
World 324.4 425.6 606.0 331.8 320.0 382.5 100.8 -85.5 -234.5 -381.8 -482.1
World excluding EU -72.1 -26.5 219.9 327.0 -67.5 -115.0 -433.1 -648.1 -234.5 -381.8 -482.1
World excluding euro area -55.5 10.7 222.1 280.0 -23.4 -67.3 -371.0 -584.5 -184.0 -336.5 -437.2
1) See note 8 on concepts and sources.

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 Statistical Annex

Table 59: World current-account balances (in billions of US dollar, 2019-2026) 30.04.2025
Spring 2025 Autumn 2024
Forecast Forecast
2019 2020 2021 2022 2023 2024 2025 2026 2024 2025 2026
EU 445.5 371.8 565.9 143.1 484.9 616.2 615.0 650.0 697.8 681.7 698.7
EU, adjusted 1) 385.9 350.0 498.9 20.5 353.5 534.1 530.6 564.0 492.8 481.2 495.6
Euro area 410.0 313.7 529.9 150.6 405.8 539.5 523.8 555.2 619.3 610.2 625.6
1)
Euro area, adjusted 324.6 242.2 406.2 -15.4 263.0 461.0 443.0 472.9 413.1 407.1 420.3
Candidate Countries2) -1.6 -34.5 -18.8 -49.3 -57.6 -39.1 -55.0 -64.2 -45.6 -69.8 -76.7
- Albania -1.2 -1.3 -1.4 -1.1 -0.3 -0.7 -0.7 -0.8 -0.9 -1.0 -1.0
- Bosnia and Herzegovina -0.5 -0.6 -0.3 -1.1 -0.6 -1.1 -1.1 -1.1 -0.8 -1.0 -1.1
- Georgia -1.1 -2.0 -1.9 -1.1 -1.7 -1.5 -1.7 -2.1 -1.4 -1.4 -1.4
- Moldova -0.9 -0.6 -1.3 -2.4 -1.9 -2.9 -3.1 -3.4 -1.9 -1.9 -1.8
- Montenegro -0.8 -1.2 -0.5 -0.8 -0.8 -1.4 -1.6 -1.7 -1.0 -1.1 -1.2
- North Macedonia -0.4 -0.4 -0.4 -0.8 0.1 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4
- Serbia -3.6 -2.3 -2.7 -4.4 -2.1 -5.6 -6.0 -6.3 -4.5 -5.2 -5.3
- Türkiye 11.1 -31.2 -6.4 -45.6 -40.4 -10.0 -12.4 -20.3 -18.2 -27.5 -32.6
- Ukraine -4.2 5.1 -3.8 8.0 -9.8 -15.5 -27.9 -28.2 -16.4 -30.4 -31.8
Iceland 1.6 0.4 -0.5 -0.5 0.3 -1.1 -1.5 -1.7 -0.8 -0.7 -1.0
Norway 15.5 4.1 66.8 175.3 80.2 82.7 76.1 74.7 86.5 88.3 92.1
Switzerland 24.7 -0.5 49.9 71.2 51.2 47.5 47.3 53.5 72.1 70.8 75.5
Australia -0.2 25.0 40.2 5.5 -5.4 -34.3 -30.8 -34.3 -5.7 4.4 1.1
Canada -34.0 -33.3 -0.4 -6.3 -13.8 -11.4 -20.2 -20.9 -3.9 -5.2 -6.4
Japan 176.7 149.8 195.5 87.2 160.9 193.1 190.6 191.5 177.9 188.4 199.4
Korea 59.7 75.9 85.2 25.8 32.8 99.0 88.0 80.0 60.6 54.5 61.6
United Kingdom -76.6 -79.2 -13.7 -65.5 -118.2 -96.8 -100.6 -104.0 -84.8 -87.0 -90.8
United States -447.3 -572.9 -879.4 -1020.9 -915.9 -1087.6 -1089.7 -1060.3 -1028.4 -1011.3 -1027.4
Advanced economies 305.2 87.6 323.9 -425.3 -90.5 14.6 -65.6 -50.2 141.5 146.9 158.0
Emerging and Developing Asia 105.8 331.8 302.9 369.6 259.3 412.9 286.2 184.4 200.2 186.6 156.6
- China 102.9 248.8 352.9 443.4 253.0 422.0 317.4 232.9 212.6 212.2 212.3
- India -25.1 27.0 -39.9 -64.6 -20.1 -31.2 -40.3 -48.0 -41.1 -47.2 -51.0
- Indonesia -30.3 -4.4 3.5 13.2 -2.0 -8.9 -14.1 -12.9 -12.5 -15.3 -13.2
Easter Neighbourhood and Central Asia -8.1 -12.8 6.3 31.7 -12.6 -5.1 -8.8 -10.4 -7.7 -7.6 -5.9
Russia 65.7 35.4 124.9 235.8 49.4 62.3 42.3 24.7 59.7 54.9 64.2
Latin America -103.6 -7.3 -89.4 -129.9 -75.6 -75.1 -99.6 -119.2 -68.6 -82.2 -91.7
- Argentina -3.5 2.7 6.6 -4.1 -21.0 6.3 2.1 0.8 4.7 3.3 2.9
- Brazil -65.0 -24.9 -40.4 -42.2 -27.9 -61.2 -58.6 -59.4 -38.3 -40.2 -45.3
- Mexico -3.9 26.9 -4.6 -17.7 -5.6 -6.0 -22.2 -32.5 -13.6 -15.6 -17.3
MENA 89.2 -45.4 163.5 437.6 228.0 137.8 100.6 104.1 130.0 92.6 94.9
- Saudi Arabia 38.5 -25.5 40.5 150.4 35.1 -7.1 -11.5 -10.5 6.6 -19.2 -22.1
Sub-Saharan Africa -44.8 -31.1 -3.3 -23.1 -25.7 -19.3 -20.7 -28.6 -28.2 -39.9 -55.0
- South Africa -10.2 6.8 15.7 -1.9 -6.1 -2.5 -3.5 -4.9 -7.3 -8.9 -10.8
Emerging and Developing Economies 104.2 270.6 505.0 921.7 422.8 513.5 299.9 155.1 285.5 204.5 163.1
World 409.4 358.2 828.9 496.4 332.3 528.2 234.3 104.9 427.0 351.4 321.1
World excluding EU -36.1 -13.5 263.0 353.3 -152.6 -88.1 -380.7 -545.1 -270.8 -330.3 -377.6
World excluding euro area -0.6 44.6 299.0 345.7 -73.5 -11.4 -289.4 -450.2 -192.3 -258.8 -304.5
1) See note 8 on concepts and sources.
2) Data are not fully comparable to the previous forecast for the Candidate Countries, because its composition changed. Georgia was not included in the group of candidate countries in Autumn 2023 Forecast.

Table 60: Crude oil prices, 2019-2026 30.04.2025

Spring 2025 Autumn 2024
Forecast Forecast
2019 2020 2021 2022 2023 2024 2025 2026 2025 2026
Annual percentage change (USD) -9.3 -35.1 69.3 42.5 -18.1 -2.5 -15.9 -5.4 -9.4 -2.2
Price per barrel
- Brent (USD) 64.3 41.8 70.7 100.7 82.5 80.5 67.7 64.0 73.1 71.5
- Brent (EUR) 57.5 36.6 59.8 95.8 76.3 74.4 60.8 56.4 67.4 65.9

219
European Economic Forecast, Spring 2025

Note on concepts and sources

1. The directorate general for economic and financial affairs (DG ECFIN) Typically, intra-EU imports are underestimated compared to intra-EU
produces, under its own responsibility, short-term fully-fledged economic exports, leading to an overestimation of the surplus. For the past the
forecasts in Spring and Autumn. These forecasts cover the principal "adjusted" balances are Eurostat estimates for EU and ECB estimates for the
macroeconomic aggregates for the Member States, the candidate euro area. For the future, they are ECFIN's forecasts based on the
countries, the European Union as a whole, the euro area and the extrapolation of the discrepancies observed in 2022.
international environment.

2. Data for 2024 are based on outturns as far as available at the cut-off date 9. EU and euro area aggregates for general government debt are published
of this forecast. Data for 2025 and 2026 are forecasts. The source for all on a non-consolidated basis (i.e. not corrected for intergovernmental
tables is the European Commission, unless otherwise stated. Historical data loans, including those made through the European Financial Stability
for the Member States are based on the European System of Accounts Facility).
(ESA 2010). US national accounts are based on SNA 2008, whilst the
Japanese accounts use SNA 1993. Due to differences in revision schedules 10. Quarterly EU and euro-area GDP growth rates are aggregated using
of annual and quarterly national accounts, annual and quarterly figures estimates for all Member States, including unpublished quarterly forecasts
may not be fully consistent for some Member States. In order to avoid for IE, EL, CY, MT, PL and RO.
population census induced breaks in series and/or to treat Ukrainian
refugees under temporary protection consistently across Member States, 11 Net expenditure growth, table 39. See Box I.1.1
historical data for the population of working age of CZ, DE, EL, FI, SE, PL
and SK differ from published demographics data.
12 Geographical zones are defined as follows :
Euro area :
EA20 (BE, DE, EE, IE, EL, ES, FR, HR, IT, CY, LV, LT, LU, MT, NL, AT, PT,
3. Tables 5 and 6 on domestic demand and final demand respectively, SI, SK, and FI)
present data including inventories. European Union :
EU (EA20, BG, CZ, DK, HU, PL, RO, and SE).
4. In Tables 17a and 18, the data are based on the national index for the Candidate countries :
United Kingdom, USA and Japan. Albania, Bosnia and Herzegovina, Georgia, Moldova,
Montenegro, North Macedonia, Serbia, Türkiye and Ukraine

5. The potential output gap is calculated with reference to potential output Advanced economies :
as estimated via a production function, where the increase in the capital EU, United Kingdom, candidate countries, Iceland, Norway,
stock and the difference between actual unemployment and the NAWRU Switzerland, Australia, Canada, Hong Kong, Japan, Korea, New
play a key role. Zealand, Singapore, Taiwan and the United States.
Emerging and developing Asia:
6. Employment data used in tables 25-29 are based on numbers of persons. All countries in that region except the ones included in the
For the EU and EA as well as for countries for which employment was Advanced economies and the Asian MENA countries.
previously reported in full-time equivalents (ES, FR, NL, IT and US), these
tables are now based on employment in persons, limiting the Latin America :
comparability to figures published before Autumn 2023. All countries in that region.
MENA (Middle East and Northern Africa) :
7. Source: National Accounts (ESA 2010), except for US current-account in Algeria, Tunisia, Morocco, Egypt, Israel, Jordan, Lebanon, Lybia,
tables 48, 50, and 59 (Balance of Payments). Discrepancies with balance Iraq, Iran, Yemen, Saudi Arabia, Bahrain, Oman, United Arab
of payments statistics may arise due to methodological differences and Emirates, Kuwait, and Qatar.
revision schedules.
Sub-Saharan Africa :
8. EU and euro-area data are aggregated using exchange rates. World GDP All countries in that region except the African MENA countries.
is aggregated using Purchasing Power Standards (PPS). In the tables on
world trade and international payments, the aggregation is carried out on
the basis of current exchange rates. Tables 47 - 50 and 58-59 show also EU Eastern Neighbourhood and Central Asia:
and euro-area "adjusted" balances. Theoretically, balances of EU and euro Armenia, Azerbaijan, Belarus, Kazakhstan, Uzbekistan, Tajikistan,
area vis-à-vis third countries should be identical to the sum of the balances Turkmenistan.
of the individual countries in the EU or the euro area. However, intra-EU or
intra-euro-area balances are non-zero because of reporting errors. The
creation of the internal market in 1993 reduced border controls and
formalities, and accordingly the scope and precision of intra-EU trade
coverage.

220
Statistical Annex

221
PREVIOUS EUROPEAN ECONOMIC FORECASTS

1. Forecast publications (2019-2024)

Autumn 2024: a gradual rebound in an adverse environment November 2024
Spring 2024: A gradual expansion amid high geopolitical risks May 2024
Winter 2024: A delayed rebound in growth amid faster easing of inflation February 2024
Autumn 2023: A modest recovery ahead after a challenging year November 2023
Summer 2023: Easing growth momentum amid declining inflation and robust labour September
market 2023
Spring 2023: An improved outlook amid persistent challenges May 2023
Winter 2023: EU Economy set to avoid recession, but headwinds persist February 2023
Autumn 2022: The EU economy at a turning point November 2022
Summer 2022: Russia’s war worsens the outlook July 2022
Spring 2022: Russian invasion tests EU economic resilience May 2022
Winter 2022: Growth expected to regain traction after winter slowdown February 2022
Autumn 2021: From recovery to expansion, amid headwinds November 2021
Summer 2021: Reopening fuels recovery July 2021
Spring 2021: Rolling up sleeves May 2021
Winter 2021: A challenging winter, but light at the end of the tunnel February 2021
Autumn 2020: Rebound interrupted November 2020
Summer 2020: A deeper recession with wider divergences July 2020
Spring 2020: A deep and uneven recession, an uncertain recovery May 2020
Winter 2020: Offsetting forces confirm subdued growth February 2020
Autumn 2019: A challenging road ahead November 2019
Summer 2019: Growth clouded by external factors July 2019
Spring 2019: Growth continues at a more moderate pace May 2019
Winter 2019: Growth moderates amid high uncertainty February 2019

2. Selected economic analyses (2019-2024)

India's economic surge: from regional to global economic player Autumn 2024
Productivity growth in the EU: is there a trade-off with employment growth? November 2024
The cost of uncertainty – new estimates
Global trade outlook and the resilience of Global Value Chain
2024 benchmark and regular revisions: implications for the Autumn Forecast
Household saving rates in the euro area and in the US: a counterfactual analysis
Net expenditure indicator and fiscal stance: a consistent approach to assess fiscal
policy

223
 European Economic Forecast, Spring 2025

Taking into account the key role of natural capital for economic activity Spring 2024
China's impressive rise and its structural slowdown ahead: implications for the May 2024
global economy and the EU
Convergence of new Member States on the 20th anniversary of the 2004
enlargement
Survey on investment – March/April 2024
Fiscal stance: gauging the impact of fiscal policy on aggregate demand
A forecast that is tailored to, and evolves with, the needs of macroeconomic
surveillance
Impact of the Red Sea on the EU economic outlook Winter 2024
EU non-financial corporations in a challenging economic environment February 2024
Household savings and wealth in the euro area – implications for private
consumption
Food inflation in the euro area – what were the driving forces behind the
extraordinary surge in 2022-2023?
A cooling housing market amid mortgage rate increases Autumn 2023
Persistent labour market tightness during a slowdown: a reappraisal of drivers November 2023
Effects of extreme weather events on national accounts and the European
Economic forecasts
Spillover effects to the EU from a potential sharp slowdown in China
Decomposition of inflation
Potential economic repercussions of wider tensions in the Middle East: A stylised
model-based scenario
Insights from the Commission’s consumer survey: how is inflation shaping Summer 2023
consumer confidence and spending. September 2023
Medium-term projections of potential GDP growth in turbulent times Spring 2023
The new candidate countries included in the forecast May 2023
European gas market: recent developments and outlook
Recent developments in bankruptcy declarations in the EU
Profit margins and their role in euro area inflation
Which Factors Shape Growth and Inflation Going Forward? Model-Based Insights
into the Spring Forecast
Global trade fragmentation risks Winter 2023
Selling price expectations and core inflation – insights from the Commission’s February 2023
business surveys
Commodity-driven inflation: Macro effects and risks Autumn 2022
Can the EU labour market withstand a slowdown in economic activity? November 2022
The effect of rising energy and consumer prices on household finances, material
deprivation and energy poverty in the EU
Future prices in forecast assumptions
Household wealth and savings in the euro area – the effect of inflation
Exchange rate pass-through to euro-area consumer price inflation

224
 Previous European Economic Forecasts

Fiscal policy measures to mitigate the impact of high energy prices

Irish GDP developments and multinational enterprises’ activities Summer 2022
The impact of inflation on consumers’ financial situation – insights from the July 2022
Commission’s consumer survey
Stagflation risks in Europe: Are the 2020s different from the 1970s?
Alternative scenarios on the economic outlook Spring 2022
Carry-over effects and the annual growth forecast for 2022 May 2022
Member States’ vulnerability matrix
Production bottlenecks based on the Business and Consumer Surveys Winter 2022
An update on energy price development: pass-through from wholesale to retail February 2022
Business managers are upbeat about investment this year
Supply side bottlenecks Autumn 2021
Energy prices November 2021
Labour market: slack or tight?
Housing market
New survey-based measures of economic uncertainty
Selling price expectations of business managers on the rise Summer 2021
An update on the tourism sector in the EU: insights from early 2021 data July 2021
The role of savings in determining the recovery path Spring 2021
Will consumers save the EU recovery? Insights from the Commission’s consumer May 2021
survey
Spillovers from 2021 US fiscal policy
The pandemic and inflation: technical factors driving volatility
The incorporation of the Recovery and Resilience Facility in the forecast
An update on the tourism sector: insights from big data Winter 2021
The Trade and Cooperation Agreement between the EU and the UK and model February 2021
simulation of the short-term economic impact of the included Free Trade
Agreement
The road out of the crisis: an update of alternative scenarios
The road out of the crisis remains bumpy and uncertain Autumn 2020
Macroeconomic effects of Next Generation EU November 2020
Tourism in pandemic times: an analysis using real-time big data
Technical specifications underpinning the QUEST simulations of NGEU
Some technical elements behind the forecast
Technical assumption on the future trading relations between the EU and the UK
and model simulation of their economic impact
The inclusion of Next Generation EU and its Recovery and Resilience Facility in the
forecast
The impact and recovery from COVID-19: a model-based scenario analysis Summery 2020
How the pandemic shaped the forecast Spring/May 2020
Global value chains and protectionism November 2019
What is behind the slowdown? A model-based analysis of growth drivers

225
 European Economic Forecast, Spring 2025

The procyclicality of potential output

Looking at euro area GDP growth in 2019 through the lens of an estimated model Spring 2019
Euro area banks 10 years after the crisis May 2019
The impact of European Structural and Investment Funds on near-term forecasting
Changes to HICP methodology

226
EUROPEAN ECONOMY INSTITUTIONAL PAPERS SERIES

European Economy Institutional Papers series can be accessed and downloaded free of charge from the
following address: Publications (europa.eu).
.

Titles published before July 2015 can be accessed and downloaded free of charge from:

• http://ec.europa.eu/economy_finance/publications/european_economy/index_en.htm
(the main reports, e.g. Economic Forecasts)

• http://ec.europa.eu/economy_finance/publications/occasional_paper/index_en.htm
(the Occasional Papers)

• http://ec.europa.eu/economy_finance/publications/qr_euro_area/index_en.htm
(the Quarterly Reports on the Euro Area)
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versions, go to EUR-Lex at: http://eur-lex.europa.eu.

Open data from the EU

The EU Open Data Portal (http://data.europa.eu/euodp/en/data) provides access to datasets from the EU.
Data can be downloaded and reused for free, both for commercial and non-commercial purposes.