(12 December 2024 – Europe) 2025 is set to be another challenging year for the Euro economy, featuring a number of political and fiscal risks according to Goldman Sachs Economics Research.
First, US President-elect Trump’s plan to impose tariffs is likely to weigh significantly on growth, with much of the drag stemming from higher trade policy uncertainty.
Second, the negative trade effects are likely to be reinforced by continued structural headwinds in the manufacturing sector, including high energy prices and competitive pressures from China.
Third, ongoing fiscal consolidation across the Euro area.
That said, there are several reasons for continued growth rather than a Euro area recession. Growth momentum remains modestly positive; consumption is likely to recover given rising real incomes and elevated savings; and we expect the South to show continued resilience compared with the North.
“The structural outlook for the Euro area economy remains challenging. While additional policy support for investment would be key to underpinning the European economic recovery, we see significant hurdles for implementing Draghi’s recommendations. It is unlikely, in our view, that the EU will be able to scale up joint EU funding. However, we believe that additional EU defence spending is likely and some regulatory harmonisation could take place starting from next year” commented Goldman Sachs European Economics Team of Sven Jari Stehn, Filippo Taddei, Alexandre Stott, James Moberly and Katya Vashkinskaya.