The Eurozone economy expanded by 0.3% in the first quarter of 2025, slightly below the initial flash estimate of 0.4%, yet marking the fifth consecutive quarter of modest growth, according to revised data.
Eurozone Q1 GDP growth trimmed to 0.3%
The expansion was underpinned by stronger domestic demand, supported by easing inflationary pressures and lower borrowing costs, which provided relief to both households and businesses. Renewed optimism also emerged following Germany’s recent decision to ease its fiscal constraints, paving the way for higher public investment and offering a much-needed boost to confidence across the bloc’s largest economy.
Expectations of increased defense spending in several member states in response to evolving geopolitical risks further contributed to stabilizing demand, helping offset some of the persistent headwinds from volatile U.S. trade policies. The European Central Bank’s gradual shift toward a more accommodative stance, combined with targeted fiscal support measures, also played a role in shoring up near-term economic momentum.
However, the outlook for the coming quarters remains clouded by mounting external risks. Analysts warn that the impact of the latest round of U.S. trade duties—targeting key European industrial and consumer goods—could begin to weigh more heavily on the region’s export sector, eroding some of the recent gains from domestic demand. At the same time, heightened geopolitical uncertainty, tighter global financial conditions, and softening demand from major trade partners such as China are likely to dampen business investment plans and temper household spending enthusiasm.
Performance among the major Eurozone economies remained uneven. Germany, while benefiting from improved sentiment and fiscal easing, posted a modest 0.2% quarterly expansion, reflecting ongoing challenges in its manufacturing and export-driven sectors. In contrast, Spain and Italy outpaced the regional average, growing by 0.6% and 0.3%, respectively, bolstered by resilient services activity, tourism, and recovering consumer confidence. Meanwhile, France and the Netherlands registered more sluggish performances, with both economies growing by just 0.1%, highlighting lingering structural weaknesses and exposure to trade disruptions.
Overall, while the Eurozone continues to show resilience in the face of global uncertainties, economists caution that the pace of expansion may slow in the second half of 2025 unless external conditions improve or domestic stimulus efforts are intensified.
