Key Figures
The European Commission’s Directorate for Economic and Financial Affairs updated its macroeconomic projections in mid-May 2025 through its quarterly update, covering individual Member States, EU candidate countries, and the Union collectively. These forecasts are a key reference point, equipping business, investors and policymakers with the necessary insights to guide strategic decisions on the prospective trajectory of the European economy.
| MT | Spring 2025 Forecast | EU |
| 4.1% | GDP Growth (% year-on-year) | 1.1% |
| 2.2% | Inflation (% year-on-year) | 2.3% |
| 3.1% | Unemployment Rate (% of Labour Supply) | 5.9% |
(European Commission, 2025)
Spring 2025
The European Commission’s Spring 2025 Economic Forecast presented a cautious yet stabilising outlook for the EU economy. While growth was forecasted to remain at a moderate level, inflationary pressures were set to ease, and labour markets were to continue showing resilience, although risks from global trade tensions and fiscal constraints weigh heavily on the European Union’s prospects.
Economic Growth Projections
Real GDP in the EU was forecasted to grow by 1.1% in 2025, broadly unchanged from 2024, with a moderate acceleration to 1.5% in 2026. The Euro Area was projected to perform similarly, with growth at 0.9% in 2025 and 1.4% in 2026. This restrained trajectory reflects weaker trade conditions, increased uncertainty stemming from the United States’ abrupt tariff policies, and a slow recovery in investment.
The European Union’s projected growth performance underscores structural weaknesses. While domestic consumption was set to provide some stability, low investment and declining external demand could expose the European Union to vulnerabilities, particularly as firms hesitate to commit capital under increased uncertainty.
Inflation Dynamics
Inflation in the Euro Area was expected to ease from 2.4% in 2024 to 2.1% in 2025 and fall further to 1.7% in 2026, with the European Union as a whole set to follow a similar trend. The disinflationary path was expected to be driven by declining energy prices, cheaper imports, and currency appreciation, though food and services inflation remain persistent.
The faster-than-anticipated return to the European Central Bank’s target provided relief to households and businesses, yet it also reflected weak underlying demand and reduced global trade. This disinflation, while positive in the short term, could signal risks of stagnation if investment and productivity fail to strengthen.
Labour Market Resilience
Despite modest growth, the European Union’s labour market was forecasted to remain robust. Employment was projected to remain expanding, with the unemployment rate falling to a historic low of 5.7% in 2026. Wage growth, after its peak in 2024, was expected to normalise but still support household purchasing power.
Labour market strength is a key stabiliser for the European Union’s economy. However, productivity growth was set to remain weak, with skills mismatches to persisted. Without structural reforms, strong employment levels could not necessarily translate into sustainable long-term competitiveness.
Fiscal and Public Finances Outlook
The European Union’s fiscal position remains unstable. The general government deficit was projected to rise form 3.2% of GDP in 2024 to 3.4% in 2026, with eleven (11) Member States breaching the 3% threshold. Public debt stabilised at 82% of GDP in 2024, and was expected to edge higher to 84.5% by 2026.
Fiscal consolidation was considered as limited, and flexibility under the Stability and Growth Pact – particularly regarding defence spending – considered to be risky to further delaying adjustment. Elevated deficits and high debt ratios amongst several Member States were expected to leave the European Union with constrained fiscal space to respond to external shocks.
External Sector Challenges
European Union exports were projected to grow by 0.7% in 2025, that is a notable downgrade from previous forecasts, with only partial recovery by 2026. Weak global demand, compounded by trade tensions, weighs on goods exports, although services exports – particularly digital and tourism related – were to remain resilient.
The European Union’s export slowdown illustrated its vulnerability to global fragmentation. Reliance on external demand in an era of protectionism challenges the Union’s growth model, signalling a need for a deeper internal market integration and diversification of trade partners.
At a Glance: Malta’s Forecast
Malta’s economy was forecasted to maintain a strong momentum, building on the exceptional 6.0% GDP expansion recorded in 2024. Real GDP was expected to grow by 4.1% in 2025 and by 4.0% in 2026, supported primarily by robust private consumption, which was projected to expend by 4.1% in 2025. Net exports, especially from services sectors, namely tourism and financial and professional services, were also expected to contribute positively, alongside a modest increase in investment.
The labour market was expected to remain resilient, with employment growth decelerating towards pre-pandemic rates but unemployment was set to stabilise at a low rate of 3.1%. Wage growth was projected to outpace inflation, with nominal wages to rise by 4.1% in 2025 against an expected inflation rate of 2.2%. Inflationary pressures shall remain controlled, with food and services as the main drivers, while energy prices were set to remain stable.
On the fiscal side, the government deficit, which narrowed to 3.7% of GDP in 2024, through the Spring Forecast was expected to decline further to 3.2% in 2025 and fall below the 3.0% threshold by 2026. This movement is supported by reduced capital expenditure following the expiry of costs related to the national airline and gradual decrease in subsidies as a share of GDP. Meanwhile, public debt ratio was forecasted to stabilise below 48% of GDP. Malta’s outlook remained positive during this period, with a balanced growth profile, stable labour market conditions, and gradual fiscal consolidation ensuring sustainable macroeconomic stability.