Remarks by Commissioner Dombrovskis at the press conference presenting the Autumn 2025 Economic Forecast

‘Check against delivery'

Good morning. Let me begin by setting out four key messages from our Autumn 2025 Economic Forecast.

First, on growth.

The EU's economy has beaten expectations in the first nine months of this year.

Looking further ahead, we expect growth to continue at a moderate pace, despite the challenging external environment.

Second, on inflation.

Inflation is on track to be around the 2% target in the euro area, and only slightly higher in the EU, over the forecast horizon. 

A sustained return to stable prices is good news for European consumers who have seen their purchasing power eroded by inflation in recent years. 

Third, on public finances.

The overall fiscal situation has improved significantly since the COVID-19 pandemic.

However, we expect less positive developments in the coming years, with debt and deficit ratios edging up.

This is especially the case in certain Member States.

We must remain vigilant to safeguard the fiscal sustainability.

It provides the foundation to building a strong and sustainable European economy.

Fourth, and perhaps most significantly, on uncertainty:

This forecast is clouded by significant uncertainty, and the road ahead is full of potential pitfalls.

If anything is certain, it is that uncertainty will remain a defining feature of the coming years.

The challenging external environment means that we should look to domestic drivers to fuel growth.

Europe must rely on and develop its own strengths.

This means redoubling our efforts to enhance our competitiveness and unlock Europe's full growth potential.

The message is clear: We must act and we must act now.

Let's begin by taking a closer look at how developments in global trade have created a more challenging external environment.  

Globally, trade barriers have reached historic highs.

We anticipate that trade policy decisions by the US, and the responses from other key players like China, will dampen global trade.

This forecast assumes that all tariffs implemented, or credibly announced, by the US by the cut-off date will remain in place throughout the forecast horizon.

The average tariff rate faced by EU exporters to the US stands at around 10%.

This is slightly higher than in spring, and significantly above the average tariffs before the Trump administration took office.

Of course, the EU's highly open economy remains susceptible to ongoing trade restrictions and uncertainty.

At the same time, the EU faces lower average tariffs relative to many other economies, including China or India.

This provides the EU economy with a relative advantage – albeit in a context of weak global goods trade and a strong euro tempering foreign demand.

Now turning to the global growth picture.

Global economic activity expanded more vigorously than expected during the first half of 2025.

The US and Japan, but also China, recorded stronger growth than previously projected.  

This is largely due to trade frontloading and improved financial conditions.

Recent survey data point to further economic expansion in the third quarter, with activity in services continuing to outpace manufacturing.

However, global growth is forecast to decelerate in the second half of 2025.

It will then stabilise, being dragged down by high tariffs and elevated policy uncertainty.

Global growth – excluding the EU – is set to slow down, from 3.7% in 2024 to 3.4% in 2025 and 2026, before edging back up to 3.5% in 2027.

Real GDP growth in the US is forecast to fall to 1.8% in 2025, from 2.8% last year.

As you can see from the graph behind me, the EU's contribution to global growth remains modest.

This reflects a growth gap between the EU and our better-performing competitors.

It demonstrates the EU needs to step up action to reverse the trend of falling behind and catch up with other regions in terms of productivity and growth.

Turning now to examine growth and what's driving it.

We forecast the EU economy to grow by 1.4% in both 2025 and 2026, before edging up to 1.5% in 2027.

Better-than-expected growth so far this year stems from a surge in exports ahead of an anticipated tariff increase.

But, continued growth in the third quarter demonstrates the EU economy's overall resilience in navigating a highly challenging and uncertain environment.

Improved economic sentiment in October points to continued positive growth momentum.

Key conditions for an expansion in economic activity to continue remain in place.

Growth will rely on domestic demand.

Private consumption is projected to grow at a steady 1.5%.

This is supported by the resilient labour market, improving purchasing power and a mild decline in the saving rate.

Gross fixed capital formation – or investments in assets in simpler terms – will likely outperform expectations from the Spring Forecast.

We have also revised up the outlook for 2026.

This takes into account the impact of the German fiscal stimulus and a greater deployment of funds from the Recovery and Resilience Facility.

Still, as I already mentioned, the EU's highly open economy remains susceptible to increased trade restrictions.

Growth in goods exports is expected to slow down next year, before rebounding mildly in 2027.

This will be partly supported by the EU's relative tariff advantage in the US market, compared to other major trading partners.

Meanwhile, exports of services are projected to continue growing robustly throughout the forecast period.

Overall, the contribution of net exports to growth is expected to be negative in 2025 and 2026, before becoming neutral in 2027.

So, I repeat my earlier point: Europe must rely on Europe to drive growth.

The good news is that the economies of all EU Member States are set to expand this year.

While we must strive for a greater level of growth, we should also acknowledge that this is not an insignificant achievement, considering the very challenging environment.

In 2026 and 2027, we see growth picking up or remaining robust in most Member States.

Turning now to one of the EU economy's strongest assets.

Our labour market remains impressively resilient.

The EU economy generated an additional 380,000 jobs in the first half of 2025.

While employment growth slowed down, economic activity accelerated.

This has resulted in significant and encouraging productivity gains this year.

Employment in the EU is set to continue expanding moderately, by 0.5% in 2025 and 2026, before decelerating to 0.4% in 2027.

The EU unemployment rate is anticipated to edge down further, from 5.9% in 2025 and 2026 to 5.8% in 2027.

Wage growth continued to decelerate in the first half of 2025.

It is expected to decelerate further, while remaining positive.

In the EU, nominal wage growth is expected to decline from 5.1% in 2024 to 4.0% in 2025, 3.3% in 2026  and 3.1% in 2027.

Importantly, thanks to inflation stabilising at around 2%, real wage growth will allow people's purchasing power to continue increasing.

Those Member States with the highest wage growth in 2025 are also projected to record the steepest decelerations in the next two years.

Differences in compensation per employee across Member States are expected to narrow progressively over the forecast horizon.

Thanks to productivity gains and wage moderation, growth in unit labour costs is set to slow down significantly in 2026-27.   

Inflation is projected to stabilise.  

It is expected to fall to 2.1% in 2025, and hover around 2% in 2026 and 2027 in the euro area.

In the EU inflation is set to remain marginally higher, falling to 2.2% in 2027.   

Moderation in headline inflation both in the EU and the euro area is largely thanks to falling inflation in services and food.

Intensifying competitive pressures from imports and the appreciation of the euro should restrain inflation in non-energy goods. 

This is especially welcome for households that have seen rising costs erode their purchasing power in recent years.

While inflation keeps falling in most Member States, intra-EU inflation differences have increased recently.

As you can see in the map behind me, inflation is set to remain higher in Central and Eastern European countries.

This is due to stronger growth in unit labour costs, but also higher expected energy inflation.

However, these intra-EU differences are expected to become smaller in 2026 and 2027.

Now turning to public finances.

After declining to 3.1% of GDP in 2024, the EU general government deficit is projected to edge up to 3.3% in 2025, and to 3.4% in 2026 and 2027.

This largely reflects a shift in political priorities and necessities.

Defence spending is projected to rise steadily from 1.5% in 2024 to 2% in 2027, according to the COFOG methodology.

It's worth noting that the forecast considers only the defence spending that was sufficiently detailed and credibly announced by the cut-off date of the forecast, 31 October.

This means that the national investment plans currently being prepared by Member States, which include the use of the possible financial assistance by SAFE programme, could not be incorporated.

We therefore expect the figure for defence spending to increase further once these plans are taken into account.

Interest expenditure is also set to rise further.

However, fiscal adjustments in most Member States are expected to partially offset these deficit-increasing factors.

EU government debt is projected to rise from 82% of GDP in 2024 to 85% in 2027.

This increase is driven by two factors: persistent primary deficits and the fact that the average cost of public debt is higher than nominal GDP growth.

Sound public finances are the foundation of macroeconomic stability and sustainable growth.

Looking ahead, Member States will need to pursue prudent policies to safeguard the sustainability of public finances.

This involves reprioritising national budgets and taking measures to enhance the effectiveness, efficiency, quality and composition of public revenue and expenditure.

Looking at the fiscal position of Member States in closer detail, we see that eleven are expected to have deficits exceeding 3% of GDP in 2025.

These are: Belgium, Germany, France, Latvia, Malta, Austria, Slovakia, Finland, Hungary, Poland, Romania.

In Italy, the deficit is projected to drop to 3% of GDP this year, and decrease further in the following years.

I will conclude with reference to the significant uncertainty that surrounds this forecast.

The road ahead contains both downside risks and opportunities.

Let's start with the risks.

Uncertainty around trade policy remains high.

The impact of the current tariffs and non-tariff restrictions on the European economy might be greater than expected.

An escalation of geopolitical tensions could exacerbate negative supply shocks and undermine confidence.

Repricing of risks in equity markets, especially in the US technology sector, could impact investor confidence and financing conditions.

Domestically, political uncertainty might affect confidence.

In light of these factors, the EU must take resolute action to unlock growth.

For there are also opportunities to seize.

The pressures arising from the changing and challenging world could serve as a catalyst for reform here at home.

At EU-level, we have a clear roadmap to guide such reforms in our Competitiveness Compass.

Continuing to implement the measures set out in the Compass, such as simplification, completing the Single Market and boosting innovation, could bolster economic activity more than projected.

Elsewhere, higher defence spending focused on EU production and continued success in diversifying our trade could also contribute to growth.

Of course, these efforts must be complemented by growth-enhancing reforms by Member States.

Overall, we can no longer afford to be content with just getting by.

We have a window of opportunity.

We must seize it now, before it is too late.

With that, I will conclude my presentation and stand ready for your questions.

Thank you.