European Commission has confirmed its forecast for eurozone GDP growth for 2024

Autumn Forecast projects real GDP growth in 2024 at 0.9% in the EU and 0.8% in the euro area. For the EU, this is 0.1 pps. lower with respect to spring, while it is unchanged for the euro area.

Growth in the EU is expected to pick up to 1.5% in 2025, as consumption is shifting up a gear and investment is set to rebound from the contraction of 2024.

In 2026, economic activity is projected to expand by 1.8%, on the back of continued expansion of demand.

Growth in the euro area is set to follow similar dynamics and attain 1.3% in 2025 and 1.6% in 2026.

The disinflationary process that started towards end-2022 continued over the summer.

Headline inflation in the euro area is set to more than halve in 2024, from 5.4% in 2023 to 2.4%, before easing more gradually to 2.1% in 2025 and 1.9% in 2026.

In the EU, the disinflation process is set to be even sharper in 2024, with headline inflation falling to 2.6%, from 6.4% in 2023, and to continue easing to 2.4% in 2025 and 2.0% in 2026.

Household disposable income kept expanding at a healthy pace in the first half of the year, supported by expanding employment and continued recovery in real wages.

By mid-year, the purchasing power of wages had recouped almost half of the loss caused by high inflation. 

Households, however, appeared reluctant to consume their extra income.

At the cut-off date of this forecast, markets priced the euro area deposit facility rate below 3% by the end of the year.

By the end of 2025, the policy rate is expected to fall further to around 2%, some 60 basis points lower than expected in spring, and to stabilise around that level for the rest of the forecast horizon.

Most central banks in non-euro area Member States are also expected to loosen the monetary stance, with somewhat more pronounced cuts in Poland and especially Romania.

Long-term rates in the euro area (10-year) decreased in recent months, but by far less than short-term rates. They are now expected to stay slightly above 2% over the forecast horizon, with the downward adjustment since spring largely reflecting lower inflation expectations.

The unemployment rate is projected to edge further down, reaching 5.9% in the EU and 6.3% in the euro area in 2026.

After the peak reached in 2023 (6.1%), wage growth in the EU is still expected at a healthy pace in 2024 (4.9%). It is then set to slow down markedly to 3.5% and 3% in 2025 and 2026 respectively.

Wage growth will be sufficiently above inflation to allow full recoup of real wages by next year in the EU and the following year in the euro area.