Goldman Sachs has raised its growth forecasts for Germany and the Eurozone, citing the impact of increased defense spending on economic recovery. The bank expects Germany’s economic rebound to spread to neighboring countries, encouraging higher military expenditures across the Eurozone.
No ECB Rate Cut Expected in July Due to Growth Momentum
As a result of the improved growth outlook, Goldman Sachs no longer expects the European Central Bank (ECB) to cut interest rates in its July meeting. Instead, the bank forecasts 25 basis point rate cuts in April and June, citing factors such as slower growth, progress in disinflation, and trade-related downside risks.
Upgraded Growth Projections for Germany and the Eurozone
Goldman Sachs economists, including Sven Jari Stehn, revised their German GDP growth forecast for 2025 upward by 0.2 percentage points to 0.2% and for 2026 by 0.5 percentage points to 1.5%.
This positive outlook extended to the Eurozone, with the bank raising its 2024 growth forecast by 0.1 percentage points to 0.8% and 2026 forecast by 0.2 percentage points to 1.3%.
Despite the boost from increased public spending in Germany, Goldman Sachs economists also warned of short-term downside risks, particularly concerning potential U.S. tariffs on EU exports.
Source: Patronlar Dünyası/ Prepared by: İlayda Gök