The International Monetary Fund (IMF) has revised its growth forecast for the euro area’s Gross Domestic Product (GDP) for 2025 upward by 0.2 percentage points compared to its April projection, now estimating a growth rate of 0.8%. The institution attributes this improvement largely to the strong GDP performance of Ireland during the first quarter of the year.
Despite accounting for less than 5% of the eurozone’s GDP, half of this upward revision is attributed to Ireland due to its trade relations with the United States. In the early months of the year, exports significantly increased as companies anticipated tariffs announced by the Trump Administration on April 2, leading to noticeable growth in the country and consequently in the euro area as a whole.
The IMF explains, “The upward revision for 2025 reflects a historically large increase in Irish pharmaceutical exports to the United States, resulting from ‘front-loading’ [increased orders in anticipation of tariffs] and the opening of new production facilities.”
Without Ireland, the revision would amount to only 0.1 percentage points, the institution calculates.
Unlike the 2025 forecast for the eurozone, the 2026 projection remains unchanged. The IMF continues to predict a growth rate of 1.2% for the following year.
The institution forecasts that Germany will grow by 0.1% this year, an increase of 0.1 percentage points compared to the April projection. This year is expected to see a recovery after two previous years of recession in the largest eurozone economy, with GDP contracting by 0.3% in 2023 and decreasing by 0.2% in 2024.
For 2026, the IMF maintains its projection that the German economy will grow by 0.9%, consistent with its April projections.
For France, the IMF expects a growth rate of 0.6% this year, followed by a 1% change next year. In both cases, the forecasts remain consistent with those from April.
Regarding Italy, the third-largest economy in the eurozone, the forecast is for a growth rate of 0.5% this year, up 0.1 percentage points from April, followed by a change of 0.8%, the same as in the previous report.
The IMF projects that Spain, the fourth-largest economy in the euro area, will see growth of 2.5% in 2025, followed by a 1.8% change. The forecast remains unchanged.
The IMF anticipates that the economic effects of companies’ strategies to concentrate orders in anticipation of tariff increases will begin to dissipate for the euro-sharing economies.
Regarding the 2026 growth forecast, the IMF notes that European governments’ defense spending will have an “impact in the following years” due to a projected increase by 2035.
On July 27, the United States and the European Union reached a trade agreement on customs duties effective August 1. The United States will impose a 15% tariff on most EU exports, including automobiles and automotive parts, which are currently taxed at 25% with an additional 2.5% tariff.
Certain products that the European Commission defines as “strategic,” such as aircraft, aircraft parts from the EU, certain chemicals, generic medicines, and natural resources, will be exempt with 0% tariffs.
Customs duties on steel, aluminum, and copper, currently at 50%, will transition to a quota-based system.
