EU expects economy to expand moderately

The European Commission's autumn 2025 economic forecast shows that driven by a surge in exports in anticipation of U.S. tariff increases, the European Union's (EU) economy maintained growth in the third quarter of this year, and it is expected to continue expanding at a moderate pace over the forecast horizon.

In the report released on Monday, the Commission said the gross domestic product (GDP) of the EU is expected to grow 1.4 percent in 2025, with the eurozone expanding 1.3 percent. Growth in 2026 is forecast at 1.4 percent for the EU and 1.2 percent for the eurozone, both slightly lower than projections made in May.

Eurozone headline inflation is projected to ease to 2.1 percent this year from 2.4 percent in 2024. Inflation across the EU is seen declining from 2.6 percent in 2024 to 2.2 percent in 2027, remaining slightly above the eurozone rate.

Due to the increase in defence spending, the EU's fiscal deficit is expected to rise to 3.4 percent of GDP in 2027 from 3.1 percent in 2024. The EU debt-to-GDP ratio is projected to rise from 84.5 percent in 2024 to 85 percent in 2027, with the eurozone ratio set to rise from around 88 percent to 90.4 percent.

The forecast noted that globally, trade barriers have reached historic highs, and the EU now faces higher average tariffs on exports to the U.S. compared with the spring forecast. Persistent trade policy uncertainty continues to weigh on economic activity, with tariffs and non-tariff restrictions potentially constraining EU growth more than expected. Any escalation in geopolitical tensions could intensify supply shocks, it noted.

EU expects economy to expand moderately

Japan's economy shrank an annualized real 2.3 percent in the third quarter of 2025, revised government data showed on Monday, compared with an initially reported 1.8 percent drop.

The revised figure for gross domestic product (GDP) from the Cabinet Office marked the fastest contraction since the third quarter of 2023.

In the three months through September, real GDP, adjusted for inflation, contracted 0.6 percent on a quarter-on-quarter basis, compared with the preliminary reading of a 0.4 percent decline, data showed.

Private consumption, which accounts for more than half of the economy, inched up a revised 0.2 percent in July-September, compared with the initial estimate of 0.1 percent.

Among other key components, the capital expenditure, a barometer of private demand, fell 0.2 percent, lowered from the initial estimate of a 1.0 percent gain.

External demand, or exports minus imports, subtracted 0.2 percentage points from the GDP, unchanged from the preliminary reading.

Japan revises Q3 GDP contraction to 2.3 pct