The Bank of England is expected to proceed cautiously with interest rate cuts, targeting a final rate of 3.5% by early 2026, according to a Bank of America forecast.
Meanwhile, risks related to potential US tariffs and global trade uncertainty may further complicate the outlook, impacting trade and consumer sentiment.
At the individual eurozone country level, Germany and France face particular challenges.
German growth forecasts have been cut to 0.4% in 2025 due to ongoing fiscal gridlock and labor market pressures, while in France, political uncertainty surrounding the budget may exacerbate economic fragility.
Italy and Spain showed relatively stronger performances, with Spain continuing to outperform other major economies in the region, due to government spending and tourism, although its long-term fiscal challenges persist.
