Commissioner Valdis Dombrovskis Proposes EU Focus on Domestic Growth and Competitiveness Amid Global Trade Challenges in Autumn 2025 Economic Forecast

In his Autumn 2025 Economic Forecast press conference, Commissioner Valdis Dombrovskis outlined a cautiously optimistic view of the European Union's economy, tempered by significant external challenges. He emphasized four key points: robust growth outpacing expectations, inflation returning to target levels, fiscal improvements offset by upcoming risks, and pervasive uncertainty shaping the outlook.

Dombrovskis highlighted a more difficult global trade environment characterized by historically high trade barriers, particularly US tariffs averaging about 10% on EU exports. This scenario, combined with an anticipated slowdown in global growth—especially in the US—threatens the EU's openness to external markets. The forecast assumes these tariffs will persist through the horizon, indicating a tilt toward accepting sustained trade restrictions as a factor.

Against this backdrop, the Commissioner urged the EU to "rely on Europe to drive growth," signaling a shift toward boosting internal demand, competitiveness, and innovation. Investment outlooks have been revised upward, partly owing to increased German fiscal stimulus and Recovery and Resilience Facility funds. However, net exports are expected to remain a drag on growth until 2027, underscoring the dependency on domestic economic engines.

While public finances improved post-pandemic, forecasted fiscal deficits are set to widen slightly, driven notably by rising defence expenditure (projected up to 2% of GDP by 2027). Dombrovskis calls for prudent fiscal policies and enhanced budget efficiency to maintain sustainability amid these pressures. Eleven Member States are predicted to exceed deficit thresholds, suggesting differentiated national responses.

- EU producers and exporters face sustained trade barriers, increasing costs and export uncertainties, with a moderate negative impact. - Consumers benefit from stabilizing inflation and real wage growth, enhancing purchasing power. - National authorities confront the challenge of balancing defensible budget deficits and rising defence commitments. - EU regulatory bodies and policymakers are prompted to accelerate competitiveness reforms via the Competitiveness Compass to mitigate external shocks.