Macroeconomic overview
Sections: GDP Growth Inflation
GDP Growth
Economic growth in Europe for 2025 is forecast to face significant challenges amid a complex global trading environment marked by trade tensions, policy uncertainty, and shifting monetary dynamics.
The IMF’s April 2025 update highlights that rising protectionism, including new tariffs and trade barriers, is dampening global trade, which disproportionately affects some export-dependent European economies. The OECD adds that geopolitical risks and tighter financial conditions are further clouding the growth outlook, with potential European Central Bank (ECB) rate cuts offering limited relief due to persistent inflation concerns in some regions. The average GDP growth rate in Europe is projected by the IMF to be 1.4% in 2025, a slight decline from 1.5% in 2024, driven by weaker external demand and disruptions in global trade. The ECB notes that while domestic demand is holding up in some countries, the manufacturing sector remains a weak spot, particularly in economies like Germany and Italy, where industrial output has contracted. The IMF also stresses that unlocking stronger medium-term growth will require boosting investment especially in digital and green sectors and addressing labour market inefficiencies through structural reforms.¹ ² ³
Belgium
GDP grew by 1% in 2024 and is expected to moderate to 0.8% in 2025, reflecting softer external demand and a cautious investment environment. Public investment and resilient household consumption remain key supports to growth.⁴ ⁵
Denmark
Denmark stands out in the European market with 3.7% GDP growth in 2024, driven primarily by the strong performance of its pharmaceutical industry, which has seen a surge in both production and exports. Growth is expected to moderate to 2.9% in 2025 as global demand levels off.⁶
Finland
Finland continues to face headwinds, with a contraction of 0.1% in 2024, following weak construction investment and trade. A recovery to around 1% growth is expected in 2025, buoyed by a recovery in private investment and consumption.⁷
France
France saw 1.1% growth in 2024, a slight improvement to earlier estimates, supported by public expenditures and foreign trade. However, growth is forecast to slow to 0.6% in 2025, amid fiscal tightening and waning post-Olympic consumer spending.⁸ ⁹
Germany
Germany's economy contracted by 0.2% in 2024, mainly due to manufacturing stagnation and weak export growth. While the IMF forecasts flat growth in 2025, easing monetary policy and lower financing costs are expected to boost investment. Construction is forecast to rebound in 2025, driven by rising demand for housing and infrastructure.¹⁰ ¹¹
Ireland
GDP growth rebounded to 1.2% in 2024, with this growth expected to accelerate to 2.3% in 2025, underpinned by stable tax revenues and easing inflation.¹² ¹³
Israel
Despite geopolitical uncertainty, Israel's GDP grew by 0.9% in 2024, with a strong rebound forecast for 2025 up to 3.2%. This growth is expected to be driven by resilient private consumption and investment, with potential boosts from high-tech exports and consumer spending.⁵ ¹⁴
Italy
Italy’s economy grew by 0.7% in 2024, and is projected to slow to just 0.4% in 2025. Growth is supported by EU-funded investment, but trade tensions and financial uncertainty have tightened conditions, while structural challenges like high public debt and low productivity persist.¹⁵
Netherlands
The Dutch economy expanded by 1.0% in 2024, with a modest acceleration to 1.4% expected in 2025, supported by household consumption and stronger export outlook.⁵
Norway
Norway maintains solid momentum with 2.1% GDP growth in 2024, which is forecast to remain the same in 2025, driven by a recovery in the offshore sector and expansionary fiscal policies.¹⁶
Spain
Spain remains among the region’s top performers with 3.2% growth in 2024, led by strong domestic demand and robust tourism. This growth is further supported by EU Recovery Funds, which have contributed to boosting infrastructure, supporting businesses, and promoting sustainable tourism. A slight moderation to 2.5% is expected in 2025, in line with normalising demand.¹⁷ ¹⁸
Sweden
Sweden's economy grew by 1.0% in 2024, recovering from an earlier slowdown, with growth projected to accelerate to 1.9% in 2025. With supportive policies and a rebound in real incomes, private domestic demand is likely to strengthen, as inflation has been kept in check. However, external challenges, geo-economic fragmentation, and slowing productivity may limit growth potential.¹⁹ ²⁰
UK
The UK economy experienced 1.1% growth in 2024, supported by easing inflation and improving consumer sentiment. The IMF projects 1.1% growth in 2025, which is lower by 0.4 percentage points compared to earlier forecasts. This adjustment reflects a smaller carryover from 2024, the potential impact of recent tariff announcements, rising gilt yields, and weaker private consumption amid higher inflation partly due to higher inflation driven by upward adjustments in regulated energy prices.²¹ ²²
Inflation
The ECB projects that inflation in the euro area will continue to decline, driven by falling energy prices, weaker demand, and the unwinding of past supply shocks.
Inflation in Europe is forecasted to ease in 2025, but the path remains uncertain due to a mix of global and domestic pressures. However, the IMF cautions that new trade tariffs and potential supply chain disruptions could push up goods prices, while strong wage growth in some countries may keep core inflation elevated. The European Commission also notes that geopolitical tensions, particularly in the Middle East, could lead to energy price volatility, posing an upside risk to inflation. The average inflation rate in Europe is expected to decline from 2.4% in 2024 to 2.2% in 2025, with many countries approaching the ECB’s 2% target.
Belgium
Inflation in Belgium rose to 4.3% in 2024, primarily due to the phasing out of government measures that previously mitigated high energy prices. It is projected to moderate to 3.2% in 2025 as energy prices stabilise and demand pressures ease.²⁵
Denmark
Denmark’s inflation was 1.3% in 2024 and is projected to rise to 1.9% in 2025. This uptick is primarily attributed to persistent wage growth, which is anticipated to bolster household purchasing power and sustain domestic demand, thereby exerting upward pressure on prices.
Finland
Inflation in Finland increased from 1% in 2024 and is expected to stabilise at 2% in 2025. This increase is partly due to rising energy prices and inflationary pressures from external markets, though the rate is expected to remain moderate.
France
France's inflation declined to 2.3% in 2024, down from 5.7% in 2023, driven by smaller increases in prices of manufactured goods and food. In 2025, inflation is expected to further decrease to 1.3%, aided by a sharp drop in regulated electricity prices and a slowdown in services prices linked to lower wage growth.⁸
Germany
Germany’s inflation stabilised around 2.5% in 2024, down from 6.0% in 2023. In 2025, it is projected to further decrease to 2.1% in 2025, as energy prices stabilise and wage pressures moderate.²⁴
Ireland
Inflation in Ireland was 1.3% in 2024 and is projected to rise to 1.9% in 2025, according to the IMF. The projected rise is influenced by a neutral fiscal policy combined with increased capital spending, persistent capacity constraints in infrastructure and housing, and the risk of economic overheating if fiscal policy becomes more expansionary.²⁵
Israel
Inflation in Israel is projected to ease to 2.7% in 2025, down from an average of 3.1% in of 2024. This moderation is driven by easing supply-side constraints, a slowdown in both private and public consumption, and falling oil prices.²⁶
Italy
Italy's inflation is projected to rise from 1.1% in 2024 to 1.9% in 2025, driven by persistent core inflation, especially in services, amid sustained wage growth and a tight labour market. Stabilising energy prices after earlier declines also contribute to the upward pressure.²⁷
Netherlands
Inflation in the Netherlands declined to 3.2% in 2024, and further to 2.8% in 2025, as wage pressures ease and the output gap closes.²⁸ The European Commission's recent Spring forecast notes that US tariffs are projected to reduce export growth in 2025.
Norway
Norway's inflation was 3.1% in 2024 and is projected to decline to 2.6% in 2025, as tight monetary policy and easing energy prices help reduce inflationary pressures.²⁹
Spain
Inflation in Spain was 2.9% in 2024, driven by higher services costs and the phase-out of energy subsidies. It is expected to decline to 2.2% in 2025 as core pressures ease.³⁰
Sweden
Sweden's inflation fell to 2% in 2024, down from an average of 5.9% in 2023. It is expected to rise slightly to 2.1% in 2025, reflecting subdued domestic demand, controlled inflationary pressures, and ongoing wage growth. The IMF suggests that inflation moderation is supported by a neutral monetary policy stance, while potential risks from global shocks remain a consideration for the outlook.³¹
UK
In the UK, inflation eased to 2.5% in 2024 and is expected to reach 3.1% in 2025. Despite rising inflation pressures including wage growth and energy tariffs, Bank of England (BoE) believe that recent US tariffs could ultimately reduce inflation. The BoE may revise its CPI forecasts and place greater emphasis on alternative scenarios, reflecting policy uncertainties.³²
Sources
- IMF World Economic Outlook, A Critical Juncture amid Policy Shifts, April 2025
- OECD Economic Outlook, Interim Report March 2025, Steering through uncertainty, March 2025
- ECB staff macroeconomic projections for the Euro area, European Central Bank, March 2025
- Economic forecast for Belgium, European Commission, May 2025
- OECD Economic Outlook, Volume 2024 Issue 2, Resilience in uncertain times, December 2024
- Economic Survey, Ministry of Economic Affairs, Denmark, December 2024
- Finland: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Finland, IMF, January 2025
- Macroeconomic interim projections – March 2025, Banque de France, Published on the March 12, 2025
- Economic forecast for France, European Commission, May 2025
- Germany’s economy shrinks again as manufacturing and exports falter, Fortune Media, February 25, 2025
- Economic forecast for Germany, European Commission, May 2025
- Quarterly Economic Digest Q1 2025, Ireland, PWC, January 2025
- Ireland Foreign Direct Investment, CEIC Data
- OECD Sees Israeli Economic Rebound if Military Conflicts Ebb, U.S. News & World Report L.P, April 2025
- Press Briefing Transcript: European Department, Spring Meetings 2025, IMF, April 2025
- IMF Executive Board Concludes 2024 Article IV, September 2024 Consultation with Norway,
- The Spanish economy grew 3.2% in 2024: Why is it outperforming peers?, Euro News, March 2025
- Spain’s Economy Achieves 3.2% Growth in 2024, Leading the Eurozone, Index Box, March 2025
- Economic forecast for Sweden, European Commission, May 2025
- Global economic outlook, January 2025, Deloitte, January 2025
- Global economic outlook: Six themes for 2025, EY, January 2025
- Economic outlook 2025-26: Defying gravity?, Allianz Trade, December 2024
- IMF Executive Board Concludes 2025 Article IV Consultation with Belgium, March 2025
- IMF Executive Board Concludes 2024 Article IV Consultation with Germany, July 2024
- Ireland: Staff Concluding Statement of the 2025 Article IV Mission, IMF, April 2025
- Research Department Staff Forecast, April 2025, Bank of Israel, April 2025
- Economic forecast for Italy, European Commission, May 2025
- IMF - The Netherlands: 2024 Article IV Consultation-Press Release, April 2024
- IMF Executive Board Concludes 2024 Article IV Consultation with Norway, September 2024
- Macroeconomic projections and quarterly report on the Spanish economy. March 2025, Banco de España, March 2025
- IMF - Sweden: Staff Concluding Statement of the 2025 Article IV Mission, IMF, February 2025
- Bank of England could signal faster rate cuts after Trump tariffs, Reuters, May 2025
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