Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Europe economic outlook 2025 - statistics & facts
After years of stagnation, the European economy began to recover in early 2024, with most countries achieving moderate growth and successfully avoiding recession. Looking ahead to 2025, cautious optimism prevails, driven by rising consumer spending and a rebound in investments. However, persistent challenges, including global geopolitical instability and internal political tensions in Europe could threaten the path to economic growth.
Europe also faces significant domestic challenges in 2025, with growing political instability in some of the biggest economies of the European Union. The rise of far-right parties and Eurosceptic sentiment, highlighted by recent European Parliament elections, casts doubt on future integration and EU expansion. Internal instability, marked by the collapse of the German and French governments — the EU’s "twin engines"— along with the auto industry crisis, will shape Europe’s future economic direction during the year.
The key European policies to prevent recession in 2024
The European economy showed moderate growth in early 2024, fuelled by rising employment and expanding household disposable income. Lower interest rates, real wage growth, easing inflation, energy crisis management, and excess savings from previous years all boosted consumer demand. Disinflation across major European economies was a positive sign and a direct result of the European Central Bank and Bank of England raising interest rates in 2023 to combat high inflation. By 2024, these measures paid off, leading to a shift toward rate cuts aimed at stimulating further economic growth through increased spending and investment. However, Europe's growth remained slower compared to the U.S. due to lower technological investment, lack of technological development and intense competition in key industries, like the auto sector.Political Instability and geopolitical conflict threaten Europe's growth in 2025
Looking ahead to 2025, Europe’s GDP growth is forecasted to increase from 0.9% in 2024 to over 1.5%. While there is optimism within the European economy, global uncertainties persist, particularly regarding regional conflicts and the protectionist trade policies of the new Trump administration in the U.S., which has repeatedly threatened the EU with tariffs. These policies could challenge export-dependent countries like Germany and France. Ongoing tension between the U.S. and China — the EU’s largest trade partners outside of Europe — could cause a significant risk to Europe's economies. Concerns are further amplified by the potential escalation of trade wars and broader geopolitical conflicts, such as those in the Middle East or the war between Russia and Ukraine. Although the initial economic shocks of these conflicts have been mitigated to some degree, further escalation remains a risk, particularly with shifting U.S. foreign policies that could make Ukraine more reliant on European support.Europe also faces significant domestic challenges in 2025, with growing political instability in some of the biggest economies of the European Union. The rise of far-right parties and Eurosceptic sentiment, highlighted by recent European Parliament elections, casts doubt on future integration and EU expansion. Internal instability, marked by the collapse of the German and French governments — the EU’s "twin engines"— along with the auto industry crisis, will shape Europe’s future economic direction during the year.
