Euro Area Economic Outlook
Global powerhouse:
The euro area, comprising 20 member states of the European Union that have adopted the euro as their common currency, boasts a significant economic presence, with a GDP of USD 16 trillion and a population of over 340 million. It ranks as the third-largest economy globally after those of China and the U.S. The euro area economy is characterized by its strong industrial base, diverse services sector, and significant trade linkages within the region and beyond. Further members could join the euro area in the coming years.
Muted recent economic performance:The euro area economy has experienced moderate GDP growth since the global financial crisis of 2008, weighed on by unfavorable demographics, rigid labor markets, constrained public spending, and the impact of the debt crisis on investor confidence. Moreover, the lack of dynamic, high-tech companies present in the U.S. and parts of Asia has also likely played a role in subduing the Euro area's relative economic performance. The euro area has a stronger presence in old-economy industries such as banking, combustion-engine vehicles, machinery, aerospace and pharmaceuticals.
Fiscal expansion:Since the Covid-19 pandemic, the euro area has adopted a more supportive fiscal stance: the bloc's rules on debt and deficits were suspended, and a EUR 800 billion NextGenerationEU recovery fund was agreed to finance projects—particularly those related to the green transition—across the EU. This Fund should continue to provide an important boost to economic activity in the euro area, particularly in southern and eastern Europe.
Strategic change of direction:The pandemic, rising tensions with China and the outbreak of war between Russia and Ukraine have led to a greater focus on ensuring self-reliance within the euro area and broader EU, particularly regarding energy supply and critical manufactured goods. This focus is likely to continue in the coming years, though the slowness of the EU's institutions and diverging views among member states will limit the pace of transition.
Challenges:The euro area faces multiple challenges, including an aging population, extremely high public debt levels in many members' economies, a lack of presence in emerging industries that will power the future of the world economy, and political tensions among members.
The euro area's economic outlook:A strong institutional framework, a skilled workforce, and a commitment to economic integration are all factors that will work in the Euro area economy's favor in the coming years, though GDP growth will likely lag well behind that seen in the U.S.
The Euro Area's Macroeconomic Analysis:
Nominal GDP of USD 14,182 billion in 2022.
Nominal GDP of USD 15,677 billion in 2023.
GDP per capita of USD 46,077 compared to the global average of USD 10,589.
GDP per capita of USD 41,883 compared to the global average of USD 10,589.
Average real GDP growth of 1.2% over the last decade.
Average real GDP growth of 1.4% over the last decade.
Main Economic Indicators
Economic growthThe Euro area's GDP growth over the last decade was modest and uneven across member states. The region experienced gradual recovery post-Eurozone crisis, but growth remained constrained by structural weaknesses, unfavorable demographics and political uncertainties. The COVID-19 pandemic led to a significant contraction in 2020. Recovery since then has been robust but uneven, reflecting disparities in fiscal capacity and economic structures among member countries.. To read more about GDP growth in the Euro Area, go to our dedicated page.
Fiscal policy
The Euro area's fiscal balance varied hugely across member countries over the last decade, with some states posting surpluses but most seeing deficits. Across the bloc, the COVID-19 pandemic led to a relaxation of fiscal rules, allowing for increased spending to support economies. By 2022, while the fiscal outlook improved with economic recovery, challenges remained in balancing fiscal consolidation with growth and investment needs across the diverse economies of the Euro area. Find out more on our dedicated page.
Unemployment
The Euro area's unemployment rate has nearly halved since 2014, reflecting strong labor demand, population ageing over the last decade, and government efforts to better match job seekers' skills to labor market opportunities. However, the unemployment remains higher than the G7 average, and there are huge disparities among members states. For more information on Euro Area's unemployment click here.
Inflation
The Euro area faced generally low inflation rates over the last decade, often below 2%, reflecting the region's slow economic growth and low inflation expectations. That said, the picture has changed notably since the pandemic: Inflation was well above the European Central Bank's 2% target in 2022 and 2023, due to global supply pressures, a strong bounce-back in economic activity, a rise in protectionism and the reduction of Russian gas flows to the bloc. Go to our Euro Area inflation page for extra insight.
Monetary Policy
The European Central Bank (ECB) maintained historically low policy rates from 2013 to 2021, reflecting prolonged economic sluggishness and low inflation in the Euro area. By 2022 however, the focus had shifted towards normalizing policy in response to economic recovery and rising inflation, with policy rates hiked to an over decade high. See our Euro Area monetary policy page for additional details.
Exchange Rate
The euro has seen volatility over the last decade in response to changes in global risk sentiment, and relative interest rates in the U.S. vs Europe. That said, the euro has tended to depreciate vs the dollar, likely on higher safe-haven demand and the United States' economic outperformance relative to the Eurozone. For more info on the euro, click here.
Economic situation in The Euro Area
Flash GDP data revealed that the Euro area grew 0.4% in Q3 in seasonally adjusted quarter-on-quarter terms, above Q2’s 0.2% rise and marking a two-year-high. Germany’s economy rebounded and France saw improved economic growth, thanks to stronger private and public spending and the Paris Olympics, respectively. Meanwhile, Spain maintained its growth from Q2, while Italy's economy stagnated due to declining net exports. Shifting to Q4, our Consensus is for GDP growth to slow, and October survey data is downbeat: Economic sentiment deteriorated further from Q3 amid rising pessimism in the industrial sector. In other news, in late October, severe flash floods hit Spain, causing over 200 deaths and severe infrastructure damage. Meanwhile, in early November, Germany’s government collapsed; the country will likely hold snap elections in February 2025.Euro Area Economic Forecasts
Projections out to 2034.47 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 76 expert analysts.
Want to get insight on the economic outlook for Euro Area in the coming years? FocusEconomics collects projections out to 2034 on 47 economic indicators for Euro Area from a panel of 76 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Euro Area economy. To download a sample report on the Euro Area's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Euro Area Economic Indicators
Frequently Asked Question about Euro Area's Economy
What is the economic outlook for the Euro area?
Which are the largest Euro area economies?
Is the Euro area at risk of recession?
What is the difference between Europe and the Euro area?
The economic outlook for the Euro area is uncertain. The war in Ukraine, rising energy prices, and tight monetary policy are all expected to dampen economic growth. However, the Euro area economy is still expected to grow in 2023 and 2024.
Germany is the largest economy in the Eurozone, followed by France and Italy. These three countries account for over half of the Eurozone's total GDP. Spain, the Netherlands, Belgium, and Austria are also significant economies in the Eurozone.
The Euro area is at risk of recession, as the lagged effects of monetary tightening are expected to weigh on economic growth. The Euro area economy is already showing signs of weakness, and activity may remain downbeat in the coming quarters.
Europe is a continent comprising over 50 countries with diverse economies and political systems. The Euro area, or Eurozone, specifically refers to the group of 20 European Union (EU) countries that have adopted the euro (€) as their official currency. Not all European countries are part of the EU, and not all EU members use the euro.