S&P Global revises 2025 eurozone GDP growth forecast to 0.9% from 1.2%

However, it expects a substantial recovery beginning next year, thanks to fiscal stimulus measures in Germany and the European Union (EU). For 2026, it now forecasts a GDP growth of 1.4 per cent for the eurozone.

The European Central Bank (ECB) could deliver its final rate cut of the year by June, when interest rates might decline to 2.25 per cent. S& P Global Ratings expects rate hikes as early as the second half of 2026 because fiscal stimulus programmes will push growth beyond its potential.

The economic outlook is uncertain, which is why the rating agency has included alternative scenarios for the outcome of US tariffs in this publication. In a severe tariff scenario, GDP growth in the eurozone could be limited to 0.5 per cent in 2025 and 1.2 per cent in 2026, with the ECB cutting interest rates more than once this year and raising them later than it currently expects.

Trade uncertainty, potential failure to execute fiscal plans and spillovers from the US economy currently dominate the balance of risks.

However, positive factors could tip the balance if the positive effects from fiscal stimulus programmes exceed expectations or confidence improves rapidly, S&P Global Ratings said in a release.

GDP growth in the eurozone will be subdued in 2025 but is set to increase thereafter, together with interest rates. Political developments in recent months led to changes in the rating agency’s base-case scenario.

ALCHEMPro News Desk (DS)