The EU economy is experiencing a slight rebound (from an international perspective)
The European Commission recently released its autumn economic outlook report for 2025, predicting that the EU's real gross domestic product (GDP) will grow by 1.4% and the eurozone by 1.3% in 2025; The EU economy is expected to grow by 1.4% and the eurozone economy by 1.2% in 2026. According to the latest data, after seasonal adjustment, the EU GDP in the third quarter of this year increased by 0.3% month on month and 1.5% year-on-year; The Eurozone grew by 0.2% month on month and 1.3% year-on-year. The European Commission report suggests that despite the challenging external environment, the EU economy is expected to continue expanding at a moderate pace in the future.
European Commission member in charge of economic affairs, Dombrovskis, stated that given the severe external situation, the EU must take decisive action to unleash its internal growth potential. This means accelerating the competitiveness agenda, simplifying regulation, improving the single market, and promoting innovation.
Significant differentiation in performance among economies
In recent years, the overall growth rate of the EU economy has been relatively low, and there have been occasional periods of stagnation. Since the beginning of this year, the economies of EU countries have shown a weak recovery trend in the first three quarters, with overall economic performance slightly higher than expected. The latest data shows that after seasonal adjustment, the economic growth rate of the Eurozone and the European Union in the third quarter has accelerated compared to the previous quarter's 0.1% and 0.2%, respectively. Among the 20 economies in the Eurozone, 9 countries achieved positive month on month growth and 3 countries experienced negative growth; 14 countries achieved positive year-on-year growth, while 1 country experienced negative growth.
The performance of EU economies shows significant differentiation. In terms of month on month growth rate, Sweden leads with a growth rate of 1.1%, followed closely by Portugal and the Czech Republic with growth rates of 0.8% and 0.7%, respectively; France and Spain saw month on month growth of 0.5% and 0.6% respectively, higher than the average level; Italy and Germany have zero month on month growth; Finland, Ireland and other countries have experienced shrinkage.
Since the beginning of this year, the economic performance of southern European countries such as Spain and Portugal has improved, and even become an important driving force for boosting the overall growth of the EU economy. For example, Spain's GDP grew by 3.1%, 3%, and 2.8% year-on-year in the first three quarters, exceeding market expectations. The latest data shows that in the first eight months of this year, Spain received over 66.8 million international tourists, a year-on-year increase of nearly 3.9%. The dual support of tourism recovery and manufacturing exports has enabled Spain to continue to be a top performer in economic growth in the EU region.
The French economy also performed well, achieving a month on month growth rate of 0.5% in the third quarter, marking the fastest growth rate since 2023. The growth of the French economy is mainly due to the surge in investment and exports, especially driven by the aerospace industry. However, the current French economy still faces many challenges. A recent report released by the International Monetary Fund shows that without policy adjustments, the French fiscal deficit rate is expected to expand to 5.8% in 2026, further to 6.2% in 2027 and 2028, and remain at 6.3% in 2029 and 2030 due to a significant increase in public debt interest expenditures.
At the same time, the German economy, the largest economy in the European Union, stagnated in the third quarter after shrinking by 0.2% month on month in the second quarter, dragging down the regional economic acceleration process. According to data from the German Federal Statistical Office, fixed capital investment in Germany increased in the third quarter of this year, but the decline in exports offset the positive effects of improved domestic demand, with traditional export pillar industries such as automobiles, machinery, and chemicals experiencing a slowdown. Germany is boosting its economy by expanding public spending on infrastructure, and the effectiveness of the stimulus remains to be seen.
Carsten Brzeski, head of macro research at Dutch International Group, stated that the EU economy has not yet entered a recession in the face of increasing uncertainty in both internal and external environments. Eileen Laulow, European economist at Schroeder Investment Management Group, analyzed that currently, there has been a positive shift in the outlook for EU economic growth, which is a welcome change after months of stagnation.
Strive to seek "stabilizing prices" and "promoting growth"
On October 30th, the European Central Bank announced again that it would maintain the current key interest rate level unchanged, marking the third consecutive time since July this year that it has remained unchanged. Observers believe that the weak economic recovery and falling inflation in the first three quarters of the eurozone have led the European Central Bank into a strategic phase of "extending the observation period". The current policy is neither tightening nor fully shifting towards easing, but maintaining flexibility to leave room for possible economic turning points in the future.
According to October data, the Eurozone saw an increase in new orders, improved demand, and a rebound in business activity. The initial value of the Eurozone Composite Purchasing Managers' Index (PMI) rose from 51.2 in September to 52.2 in October, the highest level since May 2023. Among them, the service industry PMI rose to 52.6, continuing to lead the way; The manufacturing output index rose slightly to 51.1, better than expected. At the same time, the service industries such as tourism and catering in many countries continue to recover, driving stable consumer spending and employment markets. According to data from the European Statistical Office, the unemployment rate in the eurozone is currently at a historical low, with per capita real income increasing and household consumption recovering.
Affected by the decrease in energy prices, the overall inflation rate in the eurozone is expected to continue to decline, from 2.4% in 2024 to 2.1% in 2025. The overall inflation rate of the European Union is expected to be slightly higher than that of the eurozone, gradually decreasing from 2.6% in 2024 to 2.2% in 2027. European Central Bank President Lagarde stated that the current inflation rate in the eurozone is still close to the medium-term target of 2%, and the ECB's overall assessment of the inflation outlook remains unchanged. The ECB will strive to find a balance between "stabilizing prices" and "promoting growth". Matos Lago, Chief Economist of BNP Paribas, said, "In Europe, labor markets in multiple countries have performed strongly, inflation has decreased, and people's purchasing power has increased
At present, the European Commission has proposed a budget reform plan, aiming to concentrate financial resources and focus on breakthroughs. Through a recovery fund worth 750 billion euros, targeted expenditures will be made to member economies to further boost their economies.
Multiple measures to address structural challenges
At present, structural problems such as the large scale of EU public debt and the obvious trend of aging labor force still seriously constrain the long-term healthy development of regional economy. Taking debt as an example, according to the latest report, the EU's fiscal deficit rate is expected to rise from 3.1% in 2024 to 3.4% in 2027 due to the increase in defense spending. The proportion of EU debt to GDP is expected to increase from 84.5% in 2024 to 85% in 2027; The proportion of eurozone debt is expected to increase from approximately 88% to 90.4%.
In the European Commission's Economic Outlook report, it is mentioned that the EU's economic policies this year will focus on solving structural problems. In the future, the EU will accelerate the promotion of green economy and digital transformation, and continuously accumulate new driving forces for economic growth. Initiatives such as the Circular Economy Action Plan provide a framework for sustainable development, but their effectiveness depends on the execution and financial support of member countries. Meanwhile, labor market reform and education investment will also be key to unlocking long-term growth potential.
The European Union, as a highly open economy, is deeply affected by changes in the external environment. The European Commission report emphasizes that trade barriers have risen to historic highs globally, and compared to the spring 2025 forecast, the average tariff level faced by the EU for exports to the United States has increased. The ongoing trade policy uncertainty is still dragging down economic activity, and the inhibitory effect of tariffs and non-tariff restrictions on EU economic growth will exceed expectations. Any further escalation of geopolitical tensions could exacerbate supply shocks.
Bert Klein, Chief Economist of Dutch International Group, believes that policy risks within Europe are related to government budgets and reform agendas, with international risks concentrated on global economic slowdown and trade policies. The intensification of geopolitical conflicts, fluctuations in energy and commodity prices, and divergence in monetary policies between Europe and the United States have all brought uncertainty to the stability of trade and financial markets.