The latest projections by the European Commission show real GDP expansion of roughly 1.4% in the European Union for 2025–26 and 1.5% in 2027, with the Eurozone slightly trailing — yet the output path remains constrained by structural and external challenges.

Brussels – The European economy is set to continue growing, but only modestly, according to the Autumn 2025 economic forecast released this month by the European Commission. While the headline numbers indicate resilience, the under‑surface reveals persistent drag from structural factors, trade uncertainty, and policy headwinds.

For the EU as a whole, real gross domestic product (GDP) is expected to increase by about 1.4% in both 2025 and 2026, and edge higher to 1.5% in 2027. In the euro‑area bloc, growth is projected at roughly 1.3% in 2025, dipping to 1.2% in 2026 before recovering to around 1.4% in 2027.

What’s driving the outlook?
Policy makers and analysts note several positive signals. Consumption remains steady, unemployment is low by historic standards, and the business‑sector balance sheets are in relatively healthy shape. Investment is beginning to pick up, especially in equipment and intangible assets, and the forecast expects investment growth in the EU to rise more appreciably in 2026.

But the growth picture is tempered by a variety of headwinds. The pace of growth in the working‑age population is slowing, which reduces potential expansion. The Commission estimates that “potential growth” will decline through 2027 for the EU, with similarly weaker dynamics in the euro area. Export contributions are expected to turn negative in 2025–26, owing to trade‑policy uncertainty and softer global demand for parts of Europe’s export base.

Key risks remain
The forecast comes with a strong caveat: upside momentum is limited and the risk of further weakening is real. Trade tensions and global supply‑chain stress still loom over Europe’s open economies. Moreover, even though inflation is projected to ease—hovering near the ECB target—the descent has been gradual and uneven.

Fiscal space for many member states is constrained: structural reforms remain unfinished, defence costs are rising amidst geopolitical pressures, and high debt burdens in several large economies dampen the flexibility of economic policy. The forecast notes that these factors will weigh on the medium‑term outlook.

Sectoral and regional nuances
On the investment side, the projection indicates that equipment investment will become a stronger growth driver in 2026. Construction investment, however, is projected to lag, with longer‑than‑expected ramp‑ups in several member states.

Labour markets remain relatively tight, but the pace of job creation has slowed. Employment growth is expected to slow through 2027. At the regional level, the export‑oriented economies with strong links to global supply chains may face more downside risk than those driven more by domestic demand.

Policy implications and strategic tilt
For policymakers in Brussels and across member states, the forecast underscores the need to avoid complacency. Resilience is evident, but the pace of recovery remains too sluggish to meet longer‑term structural transformation goals — including digitalisation, clean‑energy transition, and restoring competitiveness.

The forecast stresses the need for reforms that boost productivity, enhance labour‑market participation, and complete large‑scale investment programmes with discipline and speed.

Outlook to watch
Looking ahead, the biggest unknowns revolve around global trade flows, investment momentum, and the ability of Europe’s economies to adapt to slower demographic dynamics. Export improvements or faster‑than‑expected investment could brighten the outlook — but renewed shocks could dampen it.

In short: Europe is not in crisis—but neither is it in a growth boom. The Autumn 2025 forecast paints a picture of modest expansion conditioned by structural headwinds, external fragility, and policy constraints.