EU sees eurozone growth ticking up in 2025 but risks loom

BRUSSELS, Belgium, Nov 15, 2024 (AFP):The European Commission on Friday predicted economic growth to pick up slightly and inflation to keep falling in the eurozone next year, while warning of growing risks linked to geopolitical tensions.     

Forecasts by the commission showed eurozone growth accelerating slightly to 1.3 percent in 2025, up from 0.8 percent this year, while inflation in the 20-country single currency area was seen easing to 2.1 percent, down from 2.4 percent.     

"After a prolonged period of stagnation, the EU economy is returning to modest growth, while the disinflation process continues," the commission said.     

The growth figure was virtually unchanged from the last forecast the EU executive body published in June, when it envisaged economic activity would increase by 1.4 percent in 2025.     

On Friday, it said domestic demand was projected to drive future growth, expected to reach 1.6 percent in the eurozone in 2026.     

"As the purchasing power of wages gradually recovers and interest rates decline, consumption is set to expand further," it said.     

"Investment is expected to rebound on the back of strong corporate balance sheets, recovering profits, and improving credit conditions."     

Eurozone unemployment was projected to stand at 6.5 percent in 2024, then edge further down to 6.3 percent in 2025 and 2026, the commission said.     

But the commission also warned its outlook was subjected to growing "uncertainty and downside risks" linked to an ever-tenser geopolitical context, with Russia's war in Ukraine and conflicts in the Middle East continuing to imperil stability and energy security.     

While not cited directly, Donald Trump's imminent return to the White House following his US presidential election victory this month also loomed large on the EU's economic prospects, it suggested.     

"A further increase in protectionist measures by trading partners could upend global trade, weighing on the EU's highly open economy," the commission said.     

Trump repeatedly professed his love for tariffs on the campaign trail, threatening to target the European Union in particular.     

That could trigger a damaging trade war between the United States and Europe, with economists warning that even 10-percent tariffs could hit European economic output.     

"On the domestic front, policy uncertainty and structural challenges in the manufacturing sector could entail further losses of competitiveness and weigh on growth and the labour market," the commission said.     

Europe's powerhouse Germany is to hold early elections in February after a political crisis, as manufacturers, particularly in the automotive sector, have been hit hard by rising competition in key market China, especially on electric cars.(RSS)