Western europe GDP growth outlook dims as ECB prepares further cuts

S&P Global Market Intelligence has downgraded its economic outlook for Western Europe, now forecasting eurozone real GDP growth of 0.7% in 2024 and 1.1% in 2025.

Western europe GDP growth outlook dims as ECB prepares further cuts

The revisions are particularly stark for Germany, where real GDP is expected to decline by 0.1% in 2024 and grow by a modest 0.5% in 2025. France's growth outlook for 2025 has also been downgraded following the introduction of a stricter-than-anticipated budget, while Italy’s forecast was lowered due to weaker-than-estimated growth in the first half of the year. The UK’s 2024 growth forecast was revised from 1.2% to 1.0%, as recent data suggests a loss of momentum ahead of the autumn budget scheduled for late October. The European Central Bank (ECB) is expected to respond to slowing economic activity and falling inflation by cutting interest rates by 25 basis points at its October meeting, marking the second consecutive rate cut. A further 25 basis point cut is anticipated in December, with an additional 125 basis points of reductions projected throughout 2025. In contrast, Central Europe is benefiting from a more expansionary monetary policy, with several regional central banks acting earlier and more aggressively than the ECB in cutting rates. This is expected to support stronger growth in the region by boosting household consumption. Poland, however, is expected to maintain unchanged interest rates until mid-2025, setting it apart from its regional peers.