European economy poised for growth and consumer strength in 2025: Mastercard Economics Institute on global outlook in 2025

The Global economy in 2025 is expected to accelerate to a 3.2% growth in 2025, following a 3.1% pace in 2024, according to the latest Economic Outlook 2025 report from the Mastercard Economics Institute. Europe’s economic trajectory will face headwinds from tighter fiscal policy and trade uncertainty and tailwinds from looser monetary policy and solid consumer fundamentals. That said, inflation and growth trajectories should continue to stabilize. 

Drawing on a unique analysis of aggregated and anonymized data, and third-party sources, the “Economic Outlook 2025” report analyzes key trends across 74 global markets, with Europe emerging as a focal point for the year ahead. 

Key findings from the report include:

• Moderate growth acceleration for Europe. The Global economy in 2025 is expected to accelerate to a 3.2% growth in 2025, following a 3.1% pace in 2024, with a modest expansion in Europe. In the Nordics, growth is set to pick up from 1.3% to 1.7%, and in Central and Eastern Europe from 1.8% to 3.0%. While inflation in most European countries is likely to approach the central bank target as services inflation cools, growth will face both tailwinds from decreasing interest rates and headwinds from tighter fiscal policies and global trade uncertainties.  
  
  
• European consumers remain resilient. Unemployment rates are projected to remain historically low, even if they edge slightly higher. Real disposable income growth- the difference between wage increases and inflation – will remain positive ensuring ongoing consumer purchasing power recovery. Meanwhile, lower interest rates will ease the mortgage squeeze of households with variable mortgages.  In the Nordics, where variable-rate mortgages dominate, lower interest rates are set to revitalize housing markets and household consumption. Lower interest rates should also disincentivize the currently high household savings rates. 
  
  
• Travel twins gaining popularity. In the travel sector, price-conscious European travelers are opting for "travel twins” - less expensive or less crowded alternatives to popular destinations. For example, Dublin is witnessing higher hotel transaction growth compared to London, while Copenhagen is outpacing Amsterdam. Similarly, Stockholm, “Venice of the North”, is gaining traction over Venice, and Seville offers an appealing alternative to Madrid. Intra-regional travel, particularly within Europe, dominates cross-border hotel spending.
  
  
• A continued focus on experiences. Spending on experiences and “big moments” remains robust. However, declining interest rates are expected to broaden spending by boosting purchases of big-ticket items such as electronics, furniture and appliances. European consumers continue to seek value, however, and remain empowered as innovation and digitization in the retail sector provide them with more choice, and businesses with operational efficiency.
  
  
• The rise of the SHEeconomy. The global labor market, including Europe, is seeing a notable resurgence of women re-entering the workforce, also known as the “SHEeconomy” phenomenon.  Nearly all European economies have recorded significant increases in women’s labor force participation rates, driven by more flexible work arrangements, higher job creation in sectors like healthcare and education, and lower starting point allowing for more room for growth.
  
  

Natalia Lechmanova, Chief Economist Europe at Mastercard Economics Institute says: "Europe’s economic growth will modestly accelerate in 2025, supported by declining interest rates, but remain soft as tighter fiscal policy and trade uncertainty will act as headwinds. Consumers will remain the bright spot, underpinned by strong consumer fundamentals and ongoing recovery in purchasing power. Even as price sensitivity moderates, consumers will likely continue to appreciate value, when choosing enriching experiences or new things."