The European Commission has welcomed a “gradual” rebound in economic activity, but warns that the EU is “especially vulnerable” in a context of growing geopolitical tensions.
Inflation in the EU could fall by more than 50% next year, amid a modest economic rebound and an unemployment rate at historic lows, according to European Commission forecasts published on Friday.
The report – whose figures were finalized in October, before the US elections brought back to power donald trump– warns that the bloc’s open economy is “especially vulnerable” to therise of protectionism.
Inflation will drop drastically in 2025
The news comes after a period of rising energy and food pricespartly caused by Russia’s large-scale invasion of Ukraine in 2022. The high cost of living was a major concern for voters who went to the polls in June, in a European election in which produced a significant increase in support for far-right parties.
But inflation will fall sharply next year, with an increase in EU prices of only 2.4% in 2025compared to 9.2% in 2022, which will bring the indices much closer to the target of the European Central Bank of 2% inflation for the euro zone. Unemployment in the EU “reached a new historic low of 5.9%” in October, the report adds.
Saving before spending
But EU households, hit by recent crises, continue to save prudently rather than spend, and the possibility of new bursts in global trade continues to worry policymakers in Brussels. “A new increase in measuresprotectionists by trading partners could disrupt global trade, weighing down the EU’s highly open economy,” the report warns.
trump won the November 5 elections with the promise of impose 10% tariffs on imports from places like the EUbut the Commission’s forecasts only take into account policies announced and specified “in sufficient detail” before a deadline at the end of October.
The bloc’s biggest economic laggard is its largest member, Germany, whose growth will be the lowest in the EU in 2025 and the second lowest in 2026, at 0.7% and 1.3% respectively, according to forecasts , a result that is attributed to the weak domestic and foreign demand for manufactured goods already Labor shortage plaguing the construction sector.
The sluggishness of the German economyis accompanied by political turmoil, following the dramatic resignation of the liberal coalition partners, the FDP, which brought in the socialist Chancellor Olaf Scholz to call early elections for February 2025.
Additional sources • Enrique Barrueco (Voice-over)
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