UBS underlines that corporate credit (16% annually) confirms its growth outlook regarding Greece.
The bank notes that annual inflation amounted to 2.6% in December 2024, adding, however, that a deflation in food prices was observed for the first time since 2021. UBS expects a 2.5% surplus in GDP for 2025.
Regarding the Eurozone, UBS projects GDP growth at 0.7% in 2024, 0.9% in 2025, and 1.1% in 2026—0.3 percentage points below consensus for the latter two years. However, the forecast is weighted to the downside, reflecting lingering economic risks.
Labor Market Resilience
Despite subdued growth, the Eurozone labor market remains robust, with unemployment near record lows and wages showing strong increases. UBS expects inflation to decline to the European Central Bank’s (ECB) 2% target by early 2025, paving the way for monetary policy adjustments.
Rate Cuts Expected
UBS anticipates the ECB will reduce interest rates by 25 basis points in each of its next four meetings, reaching a neutral level of 2% by June 2025. Developments in the labor market will be critical in shaping GDP growth, inflation trajectories, and ECB monetary policy decisions.
Regarding two key Eurozone economies, UBS believes Germany is expected to continue underperforming, with projected GDP growth of 0.6% in 2025 and 0.8% in 2026, both with downside risks.
UBS cites that while there was an appointment of a new prime minister in France, political uncertainty persists. UBS forecasts GDP growth of 1.1% in 2024 and 0.9% in 2025.
UBS emphasizes that labor market trends will remain central to the Eurozone’s economic outlook, influencing both inflation and the path of monetary policy.
Source: Tovima.com
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