According to the September 2025 ECB staff macroeconomic projections, real GDP growth in the euro area is expected to reach 1.2% in 2025, 1.0% in 2026 and 1.3% in 2027. The outlook for 2025 has been revised up by 0.3 percentage points compared with the June 2025 projections, mainly reflecting stronger incoming data and upward revisions to historical figures. Economic growth is expected to benefit from higher real wages and employment, increased public investment, particularly in infrastructure and defence, and more favourable financing conditions following recent monetary policy decisions.

Despite volatility linked to frontloading effects in Ireland and ongoing trade tensions, underlying growth in the rest of the euro area has remained stable. Over the medium term, private consumption and investment are set to drive activity, while exports are constrained by higher US tariffs, a stronger euro and competitiveness challenges. The unemployment rate is projected to decline gradually to around 6.1% by 2027.

Inflation is projected to stabilise around the ECB’s medium-term target. Headline HICP inflation is expected to average 2.1% in 2025, fall to 1.7% in 2026 and rise again to 1.9% in 2027. This pattern reflects moderating non-energy components, receding wage pressures and the temporary impact of lower energy prices, before the introduction of the EU Emissions Trading System 2 (ETS2) lifts energy inflation in 2027. HICP inflation excluding energy and food (HICPX) is projected to ease from 2.4% in 2025 to 1.8% in 2027.

Compared with the June 2025 projections, headline inflation has been revised up by 0.1 percentage points for 2025 and 2026 due to higher energy and food commodity prices, while a 0.1 percentage point downward revision is foreseen for 2027 owing to the appreciation of the euro.