EU Commission Predicts Recovery for Eurozone: Highlights Global Trade Risks

image

EU Commission Predicts Recovery for Eurozone: Highlights Global Trade Risks

The European Commission forecasted on Friday that the Eurozone will progress towards economic growth in 2025 and 2026, while inflation is expected to slow down. However, it also issued warnings regarding the risks associated with the U.S. protectionist policies and energy prices stemming from the Middle East. Donald Trump, the elected president of the U.S., one of Europe's largest trading partners, plans to impose tariffs of 10% or more on all imported goods.

During this period of increasing geopolitical risks and policy uncertainty, Europe’s structural dependence on energy was highlighted as a point of vulnerability. The conflicts in Ukraine and the Middle East, along with the potential for international trade to come under protectionist pressure, were also noted. The 20 countries using the Euro are expected to grow by 0.8% in 2024, 1.3% in 2025, and 1.6% in 2026.

GDP forecasts for Germany and France Germany, the largest economy in Europe, is projected to grow by 0.7% in 2025 and 1.3% in 2026 after two consecutive years of contraction. France is expected to see its growth rate of 1.1% in 2024 decline to 0.8% in 2025, but then rise to 1.4% in 2026. During this period, Germany's growth rate will fall below the Eurozone average of 1.6%.

The Commission indicated that consumer prices, which are expected to fall in line with the European Central Bank's intention to bring inflation to a medium-term target of 2%, will decrease from 2.4% in 2024 to 2.1% in 2025 and 1.9% in 2026. This decline represents a positive trend for inflation.

Eurozone public debt and budget deficit The European Commission stated that the Eurozone budget deficit will decrease to 3% this year, continuing to fall to 2.9% in 2025 and 2.8% in 2026. European Union rules require countries to keep their public debt below 3% of gross domestic product (GDP). However, the total public debt of the Eurozone is expected to rise from 89.1% this year to 89.6% next year and 90% in 2026.

Forecasts for the Turkish economy The Commission anticipates that it will take several years for inflation in Turkey to drop to single-digit levels, with the unemployment rate expected to be 9.3% in 2024, 9.9% in 2025, and 9.8% in 2026.

Turkey’s economy is predicted to grow by 3% in 2024, 3.2% in 2025, and 4% in 2026. Yearly inflation rates, as measured by the Consumer Price Index (CPI), are projected to be 59.8% in 2024, 30.8% in 2025, and 17.8% in 2026.