The European Commission's Autumn 2025 Economic Forecast shows that growth in the first three quarters of 2025 outperformed expectations. While the strong performance was initially driven by a surge in exports in anticipation of tariff increases, the EU economy continued to grow in the third quarter. Looking ahead, economic activity is expected to continue expanding at a moderate pace over the forecast horizon, despite a challenging external environment.
This year's Autumn Forecast projects real GDP to grow by 1.4% in the EU in 2025 and 2026, edging up to 1.5% in 2027. The euro area is expected to mirror this trend, with real GDP projected to grow by 1.3% in 2025, 1.2% in 2026, and 1.4% in 2027. Inflation in the euro area is forecast to continue its decline, falling to 2.1% in 2025, and to hover around 2% over the forecast horizon. In the EU, inflation is set to remain marginally higher, falling to 2.2% in 2027.
Private consumption and investment drive growth
Latest business indicators and survey data point to sustained positive momentum in the coming quarters. Looking further ahead, the global environment remains challenging, but a resilient labour market, improving purchasing power and favourable financing conditions are set to support moderate economic growth.
In addition, the Recovery and Resilience Facility and other EU funds are cushioning the effect of fiscal consolidation in several Member States. This support underpins domestic demand, which is set to be the main driver of growth over the forecast horizon. Private consumption is expected to grow steadily, supported by the above factors, but also by a gradual decline in the saving rate. Investment is set to regain momentum, mainly driven by non-residential construction and capital spending on equipment.
The EU's highly open economy remains susceptible to ongoing trade restrictions, but the trade deals reached between the US and its trading partners, including the EU, have alleviated some of the uncertainties that overshadowed the Spring Forecast.
The forecast assumes that all country- and sector-specific tariffs implemented by the US administration at the cut-off date of 31 October will be in place throughout the forecast horizon. Globally, trade barriers have reached historic highs, and the EU now faces higher average tariffs on exports to the US than assumed in the Spring 2025 Forecast. Nevertheless, tariffs on EU exports remain lower than those applied to several other major global players. This represents a modest relative advantage for the EU economy, albeit in a context of weak global goods trade and a strong euro tempering foreign demand.
Inflation projected to stabilise
Inflation in the euro area has been revised slightly up from the Spring Forecast. It is now expected to come down from 2.4% in 2024 to reach the ECB's target of 2% in 2027. Trends vary across components, with decreases in services and food inflation counterbalanced by rising energy inflation. Intensifying competitive pressures from imports and the appreciation of the euro should restrain inflation in non-energy goods. Headline inflation in the EU is projected to be marginally higher than the euro area, gradually declining from 2.6% in 2024 to 2.2% in 2027. This forecast assumes that the new EU Emissions Trading System (ETS2) will enter into force in 2027, as has been legislated.
Unemployment rates decline further
The gradual slowdown of employment growth that started in 2022 continued in the first half of 2025. Still, the EU economy generated 380,000 jobs during that period. Employment is set to continue expanding moderately—by 0.5% in 2025 and 2026—before decelerating to 0.4% in 2027. The unemployment rate is anticipated to edge down further from 5.9% in 2025 and 2026 to 5.8% in 2027. Wage growth in the EU is set to slow but remain above inflation, modestly improving household purchasing power.
Government deficits to edge up
The EU general government deficit is expected to increase from 3.1% of GDP in 2024 to 3.4% by 2027, partly due to the increase in defence spending from 1.5% of GDP in 2024 to 2% in 2027, measured according to the Classification of the Functions of Government (COFOG).
The EU debt-to-GDP ratio is projected to rise from 84.5% in 2024 to 85% in 2027, with the euro area ratio set to rise from around 88% to 90.4%. This reflects ongoing primary deficits and the fact that the average cost of public debt is higher than nominal GDP growth. By 2027, four Member States are expected to have debt ratios above 100% of GDP.
Challenging global environment continues to weigh on the outlook
Looking forward, risks to the growth outlook are tilted downwards.
Persistent trade policy uncertainty continues to weigh on economic activity, with tariffs and non-tariff restrictions potentially constraining EU growth more than expected.
Any further escalation of geopolitical tensions could intensify supply shocks. At the same time, repricing of risks in equity markets, especially in the US technology sector, could impact investor confidence and financing conditions. Domestic political uncertainty might also weigh on confidence. Finally, the increasing frequency of climate-related disasters could undermine growth.
On the upside, resolute progress on reforms and the competitiveness agenda, higher defence spending focused on EU production, and new trade agreements could bolster economic activity more than projected.
Background
This forecast is based on a set of technical assumptions concerning exchange rates, interest rates and commodity prices, with a cut-off date of 27 October. For all other incoming data, including assumptions about government policies, this forecast takes into consideration information up until, and including, 31 October. Unless new policies are announced and specified in adequate detail, the projections assume no policy changes.
The European Commission publishes two comprehensive forecasts (spring and autumn) each year, covering a broad range of economic indicators for all EU Member States, candidate countries, EFTA countries and other major advanced and emerging market economies.
The European Commission's Spring 2026 Economic Forecast will update the projections in this publication and is expected to be presented in May 2026.
