Eurozone GDP Surpasses Expectations with 0.4% Growth in Q1 2025

According to preliminary data from Eurostat, the eurozone economy grew by 0.4% in the first quarter of the year compared to the previous three months, doubling the 0.2% increase recorded at the end of 2024. The result exceeded analysts' expectations, which were also for 0.2% growth. On an annual basis, eurozone GDP increased by 1.2%, marking the second consecutive quarter of expansion and surpassing the forecasted 1% growth.

Across the entire European Union, GDP rose by 0.3% in the first quarter of 2025, following a 0.4% increase in the last quarter of 2024. On an annual basis, the EU economy also expanded for a second consecutive quarter, registering growth of 1.4%.

The stronger economic performance was primarily driven by robust domestic demand. Contributing factors included easing inflation, lower interest rates resulting from the European Central Bank’s accommodative monetary policy, and improved market sentiment following Germany's decision to relax fiscal constraints under the so-called “debt brake.” Expectations of increased defense spending across the EU also played a role in supporting growth.

These positive trends helped counterbalance ongoing concerns about the United States' unpredictable tariff policy. However, this momentum may be tested in the coming months as new American tariffs begin to affect European exports, potentially leading to increased uncertainty and weaker investment and consumption levels.

Among the largest EU economies, Germany recorded a GDP increase of 0.2%. Spain and Italy outperformed, with growth rates of 0.6% and 0.3%, respectively. In contrast, more modest expansions of 0.1% were observed in France and the Netherlands.