Association of European Economic Research Institutes Forecast EU GDP to Grow by 1.2 Per Cent in 2025

The Association of European Economic Research Institutes (AIECE) has today published its bi-annual General Report, following the Spring 2025 Meeting held in Oslo hosted by Statistics Norway.

On average, AIECE member institutes forecast EU GDP to grow by 1.2 per cent in 2025 and 1.5 per cent in 2026. The forecast for Euro Area GDP growth is 1.0 per cent and 1.3 per cent. These forecasts are a bit more optimistic than those presented in the OECD’s March 2025 Interim Report and the IMF’s Spring 2025 World Economic Outlook.

The AIECE General Report for Spring 2025 highlights weak global growth amid substantial uncertainty driven by geopolitical conflicts and unpredictable US trade policies. Enhancing European competitiveness through investments in sustainability, digital infrastructure, and strategic sectors is seen as essential.

Concerning proposed reactions to US trade policy, nearly half of the respondents support the idea that the EU should join initiatives to reduce the dominance of the US dollar (see Figure 1). Additionally, 40 per cent of respondents recommend that the EU provide targeted support for industries most affected. In contrast, a majority of the surveyed economists oppose proposals to increase market access for American products and to encourage their consumption within the EU.

Notes: The figure presents AIECE members’ assessments of select proposals regarding how the EU should respond to current US trade policy. Example of how to read the figure: For the proposal that the EU should offset import duties on US cars, 5 economists expressed agreement, 10 were neutral, 7 disagreed, and 1 strongly disagreed.

In light of fiscal expansion plans in Germany and other EU countries, the recent AIECE Questionnaire asked member institutes whether the EU’s fiscal rules should be relaxed, and whether increasing public debt is advisable. As shown in Figure 2, a majority of respondents oppose loosening fiscal rules for the purpose of increasing spending on climate protection. However, opinions are divided on whether the rules should be relaxed to allow for greater defense spending.

The Spring 2025 AIECE General Report, authored by Katalin Nagy and Péter Vakhal of Kopint-Tárki Institute (Hungary), offers a comprehensive macroeconomic outlook for the European economy. It also includes detailed assessments from member institutes on key cyclical, policy, and structural issues.

Ahmet Kaya, a Principal Economist at NIESR and AIECE representative, comments: “While Trump’s tariffs affect the European economies mainly through the significant uncertainty rather than the direct trade effects, structural issues like weak innovation and low business dynamism remain the main barriers to growth. This also highlights Europe’s untapped potential. As global trade fragmentation reduces external opportunities, focusing on domestic reforms and deepening the single market could boost competitiveness for Europe. There may also be scope for the United Kingdom to rebuild ties with the EU to ease non-tariff barriers and lower post-Brexit trade costs.”

Figure 2: Assessments of AIECE members on loosening EU fiscal rules

Note: This figure shows whether AIECE members recommend loosening EU fiscal rules for specific policy purposes. Example: For the proposal to relax fiscal rules in order to increase spending on climate protection, 3 economists strongly recommend the measure, 3 recommend it, 4 are neutral, and 12 oppose the proposal.

About the AIECE

The AIECE Association of European Economic Research Institutes, founded in 1957, brings together 40 member institutes and observers from 19 countries and 5 international organizations. The association convenes twice a year to exchange views on the economic outlook for European economies and discuss economic policy as well as structural economic developments. The AIECE serves as one of the few independent forums where the economic prospects of Europe are regularly and systematically assessed. More information is available at: https://www.aiece.org/about-aiece.