The December 2025 macroeconomic projections of the European Central Bank (ECB) are moderate: GDP growth will be 1.4% in 2025 and 1.2% in 2026. This growth is mainly driven by domestic demand, rising real wages and additional government spending on defense and infrastructure.

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Exports

Despite some upward revisions, exports are a point of structural vulnerability for the region:

• Export growth projections were revised upward to 1.9% for 2025 and 1.6% for 2026. This is because the effective tariff rate applied by the U.S. was lowered to 12.1% (from 13.1% previously) and the full impact of these tariffs is expected to materialize more gradually than previously expected.
• In the medium term, exports will remain weak by historical standards. Export growth is projected to gradually strengthen to 2.6% in 2028, although it will remain below external demand growth, resulting in a continued loss of market share.

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Investment

Investment is emerging as a key component for euro area growth, with a recovery path after the -2.0% contraction in 2024. Investment is projected to grow by 2.4% in 2025 and 2.2% in 2026.

Business investment

Business investment has shown greater resilience than expected.

• During the first half of 2025, growth was driven by frontloading effects in anticipation of higher tariffs.
• In the medium term (2026-2028), it is expected to gain momentum on the back of strengthening corporate earnings, improving financing conditions, declining uncertainty and the impact of fiscal stimulus.

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Public investment and fiscal incentives

• Defense and infrastructure: The announced spending, especially in Germany, will provide a cumulative boost to GDP of 0.5% through 2028, with its largest impact expected in 2026 and 2027.
• NGEU Transition: Private investment is expected to offset the slowdown in public investment in 2027 and 2028, when Next Generation EU (NGEU) funds will expire.

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Structural challenges

The euro zone’s structural challenges particularly affect export capacity and industrial dynamism in the global market.

• Competitive pressures from Asia. Euro area exports are directly affected by competitive pressures from Asian countries, making it difficult for foreign sales growth to keep pace with external demand. This dynamic not only constrains exports, but encourages euro area imports to be driven by low-cost supply from China and other Asian economies.
• Impact of the exchange rate. A stronger euro makes European products more expensive for foreign buyers, which has contributed to industrial activity remaining subdued and exports remaining weak by historical standards.

As a direct consequence of these challenges, the euro area is projected to suffer continued losses in export market shares over the 2025-2028 horizon. Although external demand is expected to improve, European exports will continue to fall short of this potential growth.