European economic growth remains fragile and rebounding
The European Commission recently released a report stating that against the backdrop of a continuously complex global economic environment and multiple external risks that have not yet subsided, the EU economy is still showing a moderate growth trend this year and maintaining an expansion trend in the short to medium term. However, more strategic policy actions are still needed in the future. EU member states should accelerate regulatory reforms, improve the EU's single market mechanism, strengthen technological innovation capacity building, in order to further enhance overall competitiveness and lay the foundation for long-term sustainable growth.
The European Commission released its Autumn 2025 Economic Outlook report on November 17, stating that against the backdrop of a continuously complex global economic environment and multiple external risks that have not yet subsided, the EU economy will continue to show a moderate growth trend this year and maintain an expansion trend in the short to medium term.
The report shows that due to companies' early response to expectations of US tariffs, EU exports have significantly increased since the beginning of the year, becoming an important factor driving better than previously expected economic performance. Although geopolitical risks, trade frictions, and internal structural issues still exert pressure on the economic outlook, the foundation for the overall economic growth trend of the EU has not yet been shaken.
The report predicts that by 2025, the actual gross domestic product (GDP) of the European Union will grow by 1.4%, and the eurozone will grow by 1.3%; The EU economy is expected to grow by 1.4% in 2026, while the eurozone economy is projected to grow by 1.2%. These data have been adjusted compared to the forecast released in May this year, with the growth forecast for 2025 being significantly raised, while the forecast for 2026 is slightly lower than before. The European Commission predicted in May this year that the EU economy will grow by 1.5% and the eurozone economy will grow by 1.4% in 2026. Overall, the EU executive bodies hold a relatively optimistic attitude towards economic performance from this year to next year, but remain cautious about longer-term growth prospects.
The better than expected performance of the EU economy is closely related to the surge in exports that occurred earlier this year. Due to concerns about the US government imposing broader tariffs on EU goods in the future, many EU companies have chosen to significantly increase their exports to the US before the policy is implemented, thereby driving a significant improvement in overall trade data. Meanwhile, the growth of equipment investment and intangible asset investment has also become an important factor driving economic growth. In addition, Bulgaria's inclusion in the Eurozone data statistics has also to some extent boosted the overall average growth rate. Bulgaria's economy is expected to grow by 3% this year and will officially become the 21st member state of the eurozone in January next year.
However, the European Commission has repeatedly emphasized in its report that the current economic growth is still fragile and will face multiple pressures and uncertainties in the future. On the one hand, the uncertainty of US trade policy may continue to escalate, and the volatility risk of major global capital markets may intensify. Relevant external shocks may form a new drag on the Eurozone economy; On the other hand, factors such as ongoing geopolitical conflicts, accelerated supply chain adjustments, fluctuations in energy and key resource prices, frequent extreme weather events, and political instability in member countries may all have a negative impact on future growth. The European Commission warns that tariff and non-tariff trade barriers will remain difficult to significantly ease in the near future, and the structural risks they bring will persist for a long time.
At the fiscal level, the pressure faced by the EU is also constantly increasing. The report predicts that due to the increase in defense spending and related policy expenditures, the fiscal deficit of EU member states will increase from 3.1% of GDP in 2024 to 3.4% in 2027, and the EU debt to GDP ratio will increase from 84.5% in 2024 to 85% in 2027. It is estimated that by 2027, the debt level of four member countries will exceed 100% of GDP. Previously, NATO member states had jointly committed to spending 5% of their GDP on defense, which means that most EU countries need to find a balance between enhancing their military capabilities and maintaining domestic financial stability.
Meanwhile, the funding arrangements for aid to Ukraine have further sparked policy and fiscal disputes. If the EU fails to reach an agreement on using frozen Russian assets for Ukraine's reconstruction financing, member states will have to bear higher funding responsibilities in the coming years. The proposal put forward by the President of the European Commission, von der Leyen, shows that in the absence of a unified position, countries may be faced with providing up to 90 billion euros in grants to Ukraine, or jointly undertaking the obligation of joint debt issuance. If in the form of grants, the GDP of member countries is expected to decrease by 0.16% to 0.27%; If a joint debt plan is adopted, legally binding and irrevocable financial guarantees must be provided.
From the perspective of member states' economic performance, the recovery within the EU remains uneven. The German economy has been shrinking for two consecutive years and has yet to break free from its sluggish state. Although the German government has promised to increase investment in infrastructure and defense, the implementation effects of relevant policies need more time to be reflected. The European Commission predicts that Germany's economic expansion in 2025 will be limited, and a true recovery may occur next year. As the second largest economy in the European Union, France is under additional pressure due to political turmoil caused by budget disputes, leading to greater uncertainty in its economic outlook. The European Commission expects France's economy to grow by 0.9% in 2026, higher than the 0.7% in 2025 but still below the EU average.
European Commission member in charge of economic affairs, Dombrovskis, stated that although the EU is currently maintaining growth in a difficult environment, reflecting the resilience of its economic system, more strategic policy actions are still needed in the future. He called on member states to accelerate regulatory reforms, improve the EU's single market mechanism, strengthen technological innovation capacity building, in order to further enhance overall competitiveness and lay the foundation for long-term sustainable growth. (Author: Cai Chun)