BusinessEurope Economic Outlook Spring 2025 – EU’s modest growth insufficient to meet global challenges

Economic situation

• The EU economy grew by a modest 0.9% in 2024. Growth is expected to increase slightly to 1% in 2025, reflecting a downward revision of 0.3 percentage points (p.p.) compared to our autumn economic outlook. A further increase to 1.4% is forecasted for 2026. The uncertainty surrounding the implementation of new US tariffs since early 2025 has contributed to downward revisions in GDP growth estimates reported by our member federations.
• Investment is projected to cautiously rebound in 2025, despite elevated policy uncertainty. BusinessEurope’s member federations expect gross capital formation in the EU to expand by 1.4% in 2025, a minor downward revision of 0.1 p.p. compared to our autumn economic outlook, followed by a more robust increase to 2.4% in 2026.
• Both inflation and unemployment are projected to continue their decline, remaining close to recent levels. According to national member federations, headline inflation is expected to average 2.1% in the eurozone in both 2025 and 2026, bringing it near the ECB’s 2% target. At the same time, unemployment is forecast to decrease from 5.5% in the EU in 2025 to 5.4% in 2026.

Policy recommendations

To reverse the trend of decreasing competitiveness against global rivals like the U.S. and China, address stagnating productivity, and boost low growth while increasing resilience, the EU should undertake several crucial measures:

• Deepen simplification efforts by cutting regulation following evidence-based evaluations and reducing administrative burden for firms. Reduce Single Market barriers to boost intra-EU trade and competition, which in turn would favour the emergence and growth of the most productive and innovative companies. Simplify and harmonize taxation rules to help firms unlock the benefits of the Single Market. Invest in education and training to address labour shortages.
• Foster a savings and investment union, with deeper capital markets and improved funding for companies, including innovative start-ups. Strengthen public in R&D investments, while incentivising private ones. Respond to global trade volatility by diversifying source and destination markets through new trade agreements while trying to find a negotiated solution with the US that is mutually beneficial.
• Strengthen efforts to lower energy costs and increase EU’s energy resilience by investing in energy infrastructure and production capacity, diversifying sources.
• The development of a European security and defence industry is key for the competitiveness and reindustrialisation of the EU. For BusinessEurope, this strategy should encourage effective public-private cooperation to safeguard the functioning of critical infrastructure, industries, and services in times of crisis and address fragmentation in the single market for defence to foster increased production capacity in the European defence industries.

Read the Press Release.