IMF downgrades eurozone growth forecast amid geopolitical, economic challenges

The International Monetary Fund (IMF) has revised its growth forecast for the eurozone, projecting a modest 1 per cent expansion in 2025, followed by a slight increase to 1.4 per cent in 2026.

This represents a downgrade from the IMF’s previous estimates made in October 2024, with growth expectations for 2025 lowered by 0.2 percentage points and by 0.1 percentage points for 2026, Caliber.Az reports citing Russian media.

The revised outlook reflects ongoing economic challenges, including persistent weakness in manufacturing and exports, which continue to weigh heavily on the region. Political instability and policy uncertainty are also contributing to the dampened growth prospects, particularly for core economies such as Germany and France.

Germany’s GDP is now expected to grow by only 0.3 per cent in 2025, marking a 0.5 percentage point reduction compared to October’s forecast. Similarly, France’s projected growth of 0.8 pe rcent represents a 0.3 percentage point downgrade. These downward revisions reflect growing concerns about industrial slowdown and persistent economic fragility across the eurozone.

Globally, however, economic growth is expected to show modest improvement compared to 2024, with stronger-than-anticipated growth in the United States offsetting the downturn in Europe. The IMF has raised its global GDP growth forecast for 2025 to 3.3 per cent, a 0.1 percentage point increase from its October 2024 outlook. This uptick is primarily driven by an optimistic outlook for the US economy, which is projected to expand by 2.7 per cent this year, a 0.5 percentage point increase from previous estimates.

The US economy’s growth is supported by a strong wealth effect, where rising asset values encourage consumer spending, alongside favorable financial conditions. Despite the global improvements, the eurozone’s economic outlook remains overshadowed by persistent risks and uncertainties.

By Vafa Guliyeva