Path to Recovery: Projected Growth and Inflation Trends in the EU Economy

The EU economy is on a path to recovery after a period of stagnation, with projected GDP growth increasing from 0.4% in 2023 to 1.0% in 2024 and 1.6% in 2025. Inflation, which peaked in 2022, is expected to decline significantly, falling from 6.4% in 2023 to 2.7% in 2024 and 2.2% in 2025 for the EU, and from 5.4% to 2.5% and 2.1% for the Euro area, respectively. The labor market remains robust, with over two million jobs created in 2023 and a record employment rate of 75.5% for individuals aged 20-64. Investment is primarily driven by government infrastructure spending, while residential construction is set to decline due to falling house prices. External demand for EU exports is expected to grow slightly, although global trade dynamics face headwinds. The government deficit is projected to decrease from -3.5% of GDP in 2023 to -3.0% in 2024 and -2.9% in 2025, as energy-related measures are phased out and economic activity improves. However, the economy faces risks from geopolitical tensions, persistent inflation in the U.S., and climate change, which could impact long-term stability and growth.

Source: Directorate-General for Economic and Financial Affairs – European Commission