The International Monetary Fund (IMF) projects continued tepid growth across the euro‑area, stretching through 2027, with inflation remaining sticky.
In its July 11, 2025 consultation, the IMF completed its 2025 euro‑area country review. The board stressed that trade turbulence and geopolitical uncertainty are expected to weigh on economic output in 2025–27, despite some support from increased defense and infrastructure spending.
Real GDP in the euro‑area is forecast to stay modest: approximately 0.
8% growth in 2025, 1.2% in 2026, and lingering low territory through 2027 . Meanwhile, headline inflation is likely to hit the 2% target in the second half of 2025, with core inflation reaching around 2% by 2026. However, the IMF warns of upside inflation risks, including import prices driven by tariffs, heightened wage pressures, and elevated fiscal spending.
The IMF highlights significant downside risks to growth: further trade escalations, sustained geopolitical tensions, and investment pullbacks could dampen momentum more than anticipated. Meanwhile, inflation also faces two‑way risks, contingent on unexpected energy price swings or wage developments.
To bolster resilience, the IMF recommends bold EU‑level policy actions: deepening the single market, reforming labor and product markets, ensuring debt sustainability, and enhancing energy security. Key reforms include stronger banking buffers, integrated deposit insurance, improved data frameworks, and coordinated fiscal efforts—priorities highlighted in the IMF’s Financial Sector Assessment Program
