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Europe's economy on the rise: forecasts for 2023 and 2024!
EU economic forecasts from AICE show moderate growth despite geopolitical uncertainties. Important trends and developments in 2025.
Europe's economy on the rise: forecasts for 2023 and 2024!
The economic prospects for the EU and the euro area show signs of a stable, albeit moderately growing, economy. According to that Recycling portal An increase in gross domestic product (GDP) of 1.2 percent in 2023 and 1.5 percent in 2024 is forecast for the EU. These assessments come from the Association of European Conjuncture Institutes (AICE) network, which includes around 40 institutes, including the German Economic Institute (IW). Growth of 1 percent in 2023 and 1.3 percent in 2024 is expected for the euro area.
The forecasts exceed estimates in the OECD interim report and the IMF spring 2025 outlook, indicating an optimistic overall picture. Nevertheless, global growth remains weak due to geopolitical conflicts and unpredictable US trade policy. AICE emphasizes that Europe should urgently strengthen its competitiveness by investing in sustainability, digital infrastructure and strategic sectors.
Responses to trade policy and economic uncertainties
Reactions to US trade policy are complex. Almost half of AICE members support initiatives to reduce the dominance of the US dollar. In addition, 40 percent recommend targeted support for particularly affected sectors. However, the majority of institutes are against greater market openings for US products. Opinion is divided when it comes to defense spending.
Michael Grömling, the IW's economic director, emphasizes that global uncertainty is slowing down economic development and is calling on the federal government to take stabilization measures. The Spring 2025 report by Katalin Nagy and Péter Vakhal from Hungary's Kopint-Tárki provides a comprehensive macroeconomic assessment for Europe.
Economic recovery in the euro area
In addition to the EU forecasts, the ECB projections that the euro area economy is showing signs of gradual recovery, despite ongoing geopolitical uncertainties. Moderate growth of 0.7 percent is expected for 2024, followed by 1.1 percent in 2025 and 1.4 percent in 2026. However, short-term indicators point to a possible slowdown in growth, due to subdued consumer confidence and high uncertainty.
Rising real wages and growing employment could help support growth. Domestic demand is also expected to be supported by easing financing conditions. Supported by funds from the “Next Generation EU” program, fiscal policy will remain on a consolidation path until 2027.
Looking into the future
Foreign demand is expected to increase, which could support euro area exports. In addition, the unemployment rate is expected to fall over the forecast period, while productivity will increase despite structural challenges. However, headline HICP inflation is expected to rise at the end of 2024 before fluctuating around the ECB's inflation target of 2 percent from 2025.
The development of energy prices remains uncertain and could have an impact on inflation and economic growth. These developments underscore the fragile global growth prospects, influenced by geopolitical tensions and economic uncertainties.