Economic outlook 2025

For 2025, the Erste Group analysts expect moderate growth of 1.0% for the Eurozone. This is firstly because the real income situation of households should continue to improve thanks to falling inflation. Secondly, the global cycle of interest rate cuts should increase the appetite for investment in the major economic areas and the expected fiscal stimulus should take effect.

Growth of 0.4% is forecast for Austria. In Central and Eastern Europe, too, consumer spending can be expected to rise as inflation continues to weaken – or at least remain stable – making a positive contribution to growth. A slight acceleration in economic development can also be expected as a result of higher investment activity, driven by the resumption of projects funded by the new budgetary period (EU’s multiannual financial framework 2021–2027). Overall, real GDP growth of 2.6% is expected in the Central and Eastern Europe region in 2025.

A significant risk to growth lies in the current international geopolitical situation and the effects of US trade policy, which harbour additional downside risks to the Eurozone economic outlook. In addition, budget consolidation is planned in Austria and other countries in the region.

From a monetary policy perspective, there should be support for economic development, even if there could be pauses in the cycle of interest rate cuts over the course of the year. With core inflation on a downward trend, inflation in the Eurozone is expected to reach 1.9% by the end of 2025.

This should give the ECB enough leeway for further interest rate cuts in 2025. Inflation trends may not develop in a completely linear fashion across Central and Eastern Europe. In particular, administered prices could contribute to a somewhat more persistent inflation trend and thus also have a delaying effect on the interest rate policy of local central banks.