The global economic landscape in 2025 has been shaped by a mix of shifting monetary policies, geopolitical tensions, and technological advancements. While the post-pandemic rebound saw strong momentum in 2021, the pace slowed in subsequent years due to trade disputes, fluctuating interest rates, and weakening labor markets. According to the OECD, artificial intelligence and improved financial conditions are expected to support global expansion, though disparities in growth persist across regions.
The eurozone’s real GDP growth is forecast to trail that of the United States and China in 2025. Ireland is expected to lead all OECD nations with a projected growth rate of 10.2%, driven by pharmaceutical exports ahead of new U.S. tariffs effective from October 1. These tariffs, announced by President Donald Trump, could reach up to 100% on imported drugs unless companies establish production facilities in the U.S. The EU maintains that its exports are shielded under prior trade agreements, limiting the tariff impact to 15%.
Despite this high headline figure, Ireland’s GDP data can be misleading due to its role as a hub for multinational corporations that book profits there, inflating economic output. Excluding such distortions, Turkey and Poland follow with growth projections of 3.6% and 3.3%, respectively.
At the opposite end, Finland is expected to experience zero growth in 2025. The OECD attributes this stagnation to weak consumer sentiment and a sharp decline in housing construction, which is correcting an oversupply in the market.
Looking ahead, eurozone GDP growth is anticipated to dip slightly from 1.3% in 2025 to 1.2% in 2026, before recovering to 1.4% in 2027. This modest trajectory will be supported by improved financial conditions, continued investment from the Recovery and Resilience Facility (RRF), and resilient labor markets. The RRF, a key EU instrument, enables the European Commission to raise funds through bond issuance, channeling capital to member states for structural reforms and infrastructure projects.
Among European nations, Poland and Turkey are forecast to lead in 2026 with growth rates of 3.4%, followed by Lithuania at 3.1%. These three economies are the only ones expected to surpass the global average of 2.9%. In contrast, Italy will grow by just 0.6%, while Austria and Finland are projected at 0.9% each—marking them as the only countries with growth below 1%.
Spain stands out among Europe’s largest economies, with a projected 2.2% expansion in 2026—the highest in the group. Strong employment growth and rising real wages are expected to sustain private consumption, while lower financing costs and the ongoing implementation of the Recovery, Transformation and Resilience Plan (RTRP) will support investment. Spain’s limited exposure to U.S. tariffs—exports to the U.S. account for only 1.1% of its GDP—further insulates it from external shocks.
The UK is expected to grow by 1.2%, though fiscal constraints and economic uncertainty are dampening momentum. The labor market is cooling, with a 0.4% drop in payrolled employees and a nearly 14% decline in job vacancies over the past year. Germany and France are both projected to grow by 1%, while Italy remains at the bottom with 0.6%. The OECD notes that increased defense and infrastructure spending will stimulate activity in Germany, whereas fiscal tightening in France and Italy will restrain growth.
In 2027, Spain will again lead the major European economies, though its growth will moderate to 1.8%. Germany is expected to accelerate to 1.5%, while the UK and Italy will see only a marginal 0.1 percentage point increase. France will remain flat at 1%. Turkey is projected to achieve the highest growth in Europe at 4%, despite higher tariffs potentially weakening exports. However, the impact is expected to be brief, with improved financial conditions supporting domestic demand and investment.
Finland is forecast to recover gradually, with growth reaching 0.9% in 2026 and 1.7% in 2027. The rebound will be supported by lower interest rates, a stabilizing housing sector, increased defense expenditures, and stronger growth among its trading partners. Nonetheless, risks remain from U.S. trade policies, global instability, and fiscal consolidation.
— news from Euronews.com
— News Original —
GDP growth forecasts: Which European economies will have the highest growth?
A whirlwind of macroeconomic forces has been at play in 2025, with political turmoil and shifting monetary policy keeping analysts on their toes. After a post-pandemic boom in 2021 and a subsequent slowdown, this year has been marked by trade wars, tariff threats, and falling interest rates.
Forces like artificial intelligence and improved financial conditions are set to boost global growth in the coming years, according to the OECD. Even so, risks to output remain — including the weakening of labour markets. Growth estimates also vary widely between countries as the global order shifts, with changes notably linked to tech developments and resource dominance — among other factors.
OECD forecasts suggest that real GDP growth in the eurozone is projected to lag behind the world’s two largest economies, the US and China, in 2025. But what lies ahead for 2026 and 2027? And how are individual nations faring within the eurozone?
Growth in 2025: Finland lags behind
By the end of 2025, Ireland is projected to record the strongest growth when compared with other OECD countries, at 10.2%. This surge is “driven by front-loaded pharmaceutical exports ahead of US tariffs” according to the OECD Economic Outlook report, published in December 2025.
After a series of threats earlier this year, US President Donald Trump announced tariffs of up to 100% on imported pharmaceuticals starting 1 October. Trump said exemptions will be given to companies building an American production facility. The EU has nonetheless claimed that its exports are protected under an earlier trade deal, setting US tariffs on the bloc’s goods at 15%.
Ireland stands as an outlier in the OECD ‘s ranking, as the next fastest-growing countries are Turkey at 3.6% and Poland at 3.3%.
Even so, GDP in Ireland is often a misleading indicator because of the way the economy is structured. Due to the nation ‘s traditionally low corporate tax rates, Ireland is home to a large number of multinationals who book profits in the country, artificially distorting GDP.
At the other end of the OECD ranking, Finland is projected to show no growth in 2025. Weak consumer confidence and plummeting housing construction to correct oversupply have been heavily weighing on output, explained the OECD.
Next year: 1.2% growth in the eurozone
Real GDP growth in the eurozone is projected to ease modestly from 1.3% in 2025 to 1.2% in 2026, before rising to 1.4% in 2027.
Increased trade frictions will be “offset by improved financial conditions, ongoing capital spending from Recovery and Resilience Facility (RRF) funds and resilient labour markets,” said the OECD.
RRF is the key instrument to help EU economies emerge stronger and more resilient from the pandemic. Under the RRF, the European Commission borrows on the capital markets by issuing bonds on behalf of the EU. The funds raised are then made available to member states to support major reforms and investments.
Three European economies are out in front
In 2026, among 27 European countries, real GDP growth is expected to range from 0.6% in Italy to 3.4% in Poland and Turkey. Lithuania follows at 3.1%. These three countries are the only ones forecast to exceed the global average of 2.9%.
At the lower end, Austria and Finland (both 0.9%) follow Italy. They are the only countries with growth below 1%.
Spain leads growth among top five economies
The OECD estimates that Spain will grow by 2.2% in 2026. This is the highest rate among Europe’s top five economies, far ahead of the next nearest, the UK, at 1.2%.
“[In Spain,] strong job creation and real wage growth will continue to support private consumption. Investment growth will be underpinned by ongoing implementation of the Recovery, Transformation and Resilience Plan (RTRP) and lower financing costs,” the report said.
Spain’s direct exposure to US tariffs is limited, since goods exports to the United States account for only 1.1% of its GDP.
In the UK, meanwhile, government spending limits and uncertainty will also weigh on the pace of expansion. The labour market is cooling, with the number of payrolled employees falling by about 0.4% in the year to September, and the number of vacancies declining by almost 14% over the same period.
Germany and France are projected to grow by 1%, while Italy has the lowest rate at 0.6%.
“Fiscal expansion is anticipated to boost economic activity in Germany, reflecting higher spending on defence and infrastructure, but expected consolidation in both France and Italy will dampen growth,” the OECD report found.
Top five economies in 2027
In 2027, Spain will again record the highest real GDP growth among the top five economies, although its rate will ease to 1.8%. Germany is set to accelerate from 1% to 1.5%. The UK and Italy will see only a 0.1-point increase compared with 2026, while France will remain unchanged at 1%.
The OECD projects that Turkey will have the highest growth in 2027 among 27 European countries at 4%. According to the organisation, higher tariffs will weaken exports, but the impact is expected to be relatively small and short-lived. Improved financial conditions will support private consumption and investment in 2026 and 2027, which will in turn boost imports. The decline in inflation is also expected to continue.
Gradual recovery in Finland
After a recession in 2025, Finland will see a noticeable improvement with GDP growth of 0.9% in 2026 and 1.7% in 2027.
“Lower interest rates, a stabilising housing market, rising defence spending and stronger trading partner growth will support the rebound,” the report said. However, US tariffs, global insecurity, and fiscal consolidation remain headwinds.