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Europe: Economic overview
Europe in 2025 faces a period of economic uncertainty arising from geopolitical tensions across the globe. However, proximity in both geography and working relationships presents opportunities for UK exports.
Gross domestic product
Growth in gross domestic product (GDP) in Europe is expected to average 1.8% in 2025 and 2026, according to the International Monetary Fund (IMF).
In the euro area, GDP growth is lower; the European Central Bank expects this to fall further as a result of volatility arising from uncertainties in US trade policy and tariff enforcements.
Table 1. Actual and forecast GDP in Europe
| Economic areas | 2023 | 2024 | 2025 forecast | 2026 forecast | Last updated | |
|---|---|---|---|---|---|---|
| Europe |
1.5 |
1.7 |
1.7 |
1.9 |
Oct 2024 |
|
| Euro area |
0.4 |
0.8 |
1.0 |
1.4 |
Jan 2025 |
|
| Euro area (ECB) |
- |
0.8 |
0.9 |
1.2 |
Mar 2025 |
|
| Advanced European economies | France |
1.1 |
1.1 |
0.8 |
1.1 |
Jan 2025 |
| Germany |
-0.3 |
-0.2 |
0.3 |
1.1 |
Jan 2025 |
|
| Italy |
0.7 |
0.6 |
0.7 |
0.9 |
Jan 2025 |
|
| Spain |
2.7 |
3.1 |
2.3 |
1.8 |
Jan 2025 |
|
| Average |
0.6 |
1.0 |
1.4 |
1.6 |
Oct 2024 |
|
| Emerging European economies | Poland |
0.1 |
2.8 |
3.5 |
3.3 |
Jan 2025 |
| Russia |
3.6 |
3.8 |
1.4 |
1.2 |
Jan 2025 |
|
| Ukraine |
5.3 |
3.0 |
2.5 |
5.3 |
Oct 2024 |
|
| Average |
3.3 |
3.2 |
2.2 |
2.4 |
Jan 2025 |
|
Source: IMF, ECB
Inflation peaked in 2022 in Europe and has been declining gradually since then.
The European Central Bank (ECB) is set to reduce its benchmark lending rate further in 2025, with the deposit rate expected to reach 2.5%. This move aims to stimulate growth by lowering borrowing costs for businesses and consumers.
However, economic uncertainty remains – particularly in major economies such as Germany, France and Italy, where growth is projected to remain under 2%.
Germany has announced a substantial fiscal expansion plan, including a €500 billion infrastructure investment aimed at bolstering defence and economic resilience.
While GDP growth in emerging European economies is generally higher than in the advanced economies, it is forecast to fall by around 1% in 2025 and 2026.
Poland has emerged as the EU’s fastest-growing economy in recent years, driven by private consumption and investment.
Russia and Ukraine
Despite the ongoing war with Ukraine, Russia’s GDP grew in 2023 and 2024.
The main factors contributing to this growth were the continued output of crude oil, high oil prices and developing new trade relationships with Asian countries (replacing lost trade with the West).
From 2025 to 2026, Russia’s GDP growth is forecast to be more subdued as a population decline and the financial impacts of war play out.
While Ukraine’s GDP growth looks stronger than other countries in Table 1, it is expected to remain lower than pre-war levels; recovery will be reliant on financial support from Western countries.
If an agreement to end the Russia–Ukraine war is reached in 2025, the European Bank for Reconstruction and Development (EBRD) forecasts that Ukraine’s GDP could grow by 3.5% before the end of the year.
Population changes to 2100
The EU’s population is forecast to peak at 453.3 million in 2026 (increase of 1.5% from 2022) and then steadily fall to 447.9 million in 2050 and 419.5 million in 2100.
Germany is expected to have the highest population by the end of the century (84.1 million), followed by France (68.0 million), Italy (50.2 million), Spain (45.1 million) and Poland (29.5 million).
The populations of Iceland, Norway and Switzerland are expected to increase by 66%, 24% and 16%, respectively, between 2022 and 2100.
Continue reading about the European market
Market access and barriers to trade