S&P Global expects eurozone GDP growth of 0.8% in 2024, 1.3% in 2025

However, it now expects stronger growth for Spain and France this year, and weaker growth for Germany.

Eurozone GDP was up 0.2 per cent in the second quarter of 2024. This was the second consecutive quarter of expansion after more than a year of stagnation due to the energy price shock.

However, not all member states are contributing evenly to the recovery. Spain and France in particular have been among the main engines of the eurozone's economic growth over the past four quarters, while Germany continues to hold it back, S&P Global said in a release.

Consumer spending, and from next year, investment, should become the main drivers of GDP growth as real income growth accelerates, consumer perceptions of disinflation improve, and interest rates fall, S&P Global said in a release.

Inflation in the area will moderate, reaching 2 per cent in the second half of 2025.

Consumers should become more cognizant of disinflation, and lower interest rates should make saving less appealing. Consumer spending should therefore pick up and align more closely with purchasing power, driving GDP growth.

The European Central Bank (ECB) is likely to keep cutting rates once per quarter until the deposit rate reaches 2.5 per cent in the third quarter of next year, the rating agency said.

However, several factors cloud S&P Global Ratings’ visibility on the economic outlook. Labour costs are still rising quickly, especially in industry, making a more pronounced downturn in the labour market possible.

Fiscal policy could be more restrictive next year, while foreign trade could be less supportive of growth. Geopolitical factors could erode confidence and disrupt supply chains. Falling confidence indicators, often at odds with hard data, add informational noise.

The German economy is expected to gradually catch up with its peers from the second half of 2024, as the inflation differential shrinks.

Falling interest rates will encourage Eurozone consumers to spend more amid full employment.

Visibility on the economic outlook is relatively poor, with a downturn in the labour market, more restrictive fiscal policy and less supportive foreign trade all still possible, S&P Global added.

Fibre2Fashion News Desk (DS)