Euro Area Outlook 2025–2039
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Global Economic Outlook

Euro Area Outlook 2025–2039

/ Report

The Euro Area (EA) economy will continue to underperform over the next 15 years, unless major structural reforms take place to boost productivity. Over the long term, population decline will remain the most important drag on the economy. In the meantime, the bloc faces adverse risks from geopolitical factors.  

Key Insights

The Euro Area (EA) economy will continue to underperform over the next 15 years, unless major structural reforms take place to boost productivity. Over the long term, population decline will remain the most important drag on the economy. In the meantime, the bloc faces adverse risks from geopolitical factors.  

Key Insights

  • In the short run, the EA economy is projected to grow below its potential with risks to its near-term growth outlook remaining tilted to the downside. Fragile business sentiment, weaker-than-expected household spending, anemic export growth, and prolonged private underinvestment are expected to dampen activity ahead. 
  • Below-potential growth appears to be entrenched, a trend that will continue through 2039. As a baseline, if the EA does not pursue structural reforms or reduce the regulatory burden, its economy will expand at an even slower rate than the 1.3% prepandemic pace, at 0.9% a year. 
  • In our optimistic scenario, the EA economy could achieve growth levels well above 2% per annum over the next 15 years. Europe can regain its competitiveness but doing so will require decisive efforts from both public and private sectors and multiple horizontal policy actions.
  • The required policy actions are bold and span across all contributors to growth. Policy reforms would include reducing regulatory red tape, productivity-spurring investments in research and development (R&D), increasing labor supply, promoting a deeper single market, ensuring lower and stable energy prices, and integrating EA capital markets.
  • There are significant risks to the EA economic outlook that will persist over the medium term and beyond. Insufficient funding for the green and digital transitions, a failure to counteract a rapid demographic decline, and geopolitical fragmentation will continue to pose downside risks to the region’s growth potential and its ability to regain global competitiveness. 

Authors

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