Eurozone gross domestic product (GDP) is expected to remain subdued this year growing at 1.1 per cent, as multiple uncertainties weigh on domestic demand while higher US tariffs start to weaken foreign demand, according to S&P Global Ratings.

After 2025, the growth is expected to accelerate above the potential, reaching 1.4 per cent in 2027. Lower policy rates, strong private balance sheets that translate into a resilient labour market, and expansive fiscal policies will provide medium-term tailwinds.

“Our forecasts have only changed slightly since our last update in June 2025. The US and EU administrations’ trade deal has not altered the macroeconomic picture much. Our higher GDP growth forecasts for 2025 reflect a larger GDP carryover at the end of 2024 due to data revisions in some countries,” S&P Global Ratings said in its latest report titled, ‘Economic Outlook Eurozone Q4 2025: Recovery Continues Despite Consumer Hesitancy.’

Eurozone GDP growth is forecast at 1.1 per cent in 2025, with recovery accelerating to 1.4 per cent by 2027, supported by lower rates, strong labour markets, and fiscal policy, according to S&P Global.
Inflation is projected at 2.1 per cent in 2025 before easing.
Risks include higher US tariffs, geopolitical tensions, and weak confidence, though impacts vary across countries.

The eurozone economy remained resilient in the second quarter (Q2) of 2025. However, this is largely because exports to the US—which were front run ahead of tariffs in the first quarter—were slow to reverse in the second quarter. The report believes this reversal will extend into the third quarter.

The euro has appreciated more quickly than expected, largely owing to market concerns about the independence of US monetary policy. While this has given European consumers an extra boost via lower energy prices, it has not prompted a downward revision of inflation forecasts.

Strong labour-market conditions are expected to keep real wage growth above productivity for some time, sustaining inflationary pressure over the medium term.

S&P Global Ratings projects inflation to ease to 1.8 per cent in 2026 and 1.9 per cent in 2027, aligning closely with the European Central Bank’s (ECB) 2 per cent target. Barring external shocks, the ECB deposit facility rate is considered to have bottomed out at 2 per cent in the current rate-cutting cycle. Quantitative tightening is also nearing completion, which may ease long-term yields on euro-denominated government bonds.

Key risks to the baseline growth outlook include heightened tariffs, geopolitical tensions, and weak consumer confidence in certain European economies. Additional spillover effects may emerge from slower growth among Europe’s major trading partners, particularly the US, added the report.

Inflation risks remain two-sided: it could rise further in the event of escalating trade tensions, fiscal stimulus overlapping with labour-market bottlenecks, or geopolitical shocks disrupting commodity markets. Conversely, it could fall if trade diversions favour Europe or the euro appreciates more sharply than expected.

Following the recent EU–US trade announcement, baseline assumptions now include a maximum US tariff of 15 per cent on most manufactured goods. This compares with June 2025 assumptions of 10 per cent on all goods.

Despite these changes, the macroeconomic implications remain largely unchanged. At the aggregate EU level, the direct trade impact is estimated at around -0.4 per cent of GDP, only slightly lower than the -0.5 per cent implied by the April 2 announcement. Nevertheless, tariffs are now about eight times higher than they were before April, when the US levied an average tariff of less than 2 per cent on European imports.

Importantly, the tariff burden will vary across countries. Ireland and Belgium face fewer negative impacts. In contrast, Switzerland—though not an EU member—has seen its outlook deteriorate sharply after the US imposed 39 per cent tariffs, significantly affecting its growth prospects.

Fibre2Fashion News Desk (SG)

LVMH is ramping up its expansion in South Korea, with the luxury conglomerate seeking to diversify its global footprint amid geopolitical and economic uncertainties that are clouding the consumer spending outlook in the United States and China.

The group’s two largest fashion labels — Louis Vuitton and Christian Dior — are both planning to expand their flagship maison-style stores in Seoul’s Cheongdam district within the next few years, according to people familiar with the matter who asked not to be identified discussing private deliberations. Dior’s revamp may take place as early as 2027 and is expected to feature a permanent restaurant, according to the report.

LVMH Moët Hennessy Louis Vuitton SE’s watch and jewelry house Bulgari is reportedly eyeing its first flagship location in South Korea, as the group strengthens its regional presence. Meanwhile, Tiffany & Co. is expected to open a flagship store in Seoul’s Cheongdam district in 2027, according to the same sources.

A representative for LVMH did not respond to a request for comment.

South Koreans’ enduring love for luxury, combined with a resilient economy and rising consumer confidence, has made the country a bright spot for top industry names amid an increasingly uncertain global retail landscape. Louis Vuitton, Hermès and Chanel posted almost 10% growth in their combined sales in the country last year, reaching $3.3 billion, according to government data.

Beyond domestic shoppers, a surge in visitors — mainly from China and Japan — along with the weaker won, has further boosted sales. Tourist spending rose by about a third to a record 9.26 trillion won ($6.6 billion) last year, according to the Korea Herald.

At the same time, China’s premium goods market shrank the most in a decade last year, while U.S. import tariffs have prompted fashion houses to hike prices, potentially driving wealthy shoppers to buy luxury items abroad. Even Japan, where a weak yen had fueled a boom in luxury spending, is now showing signs of a slowdown.

LVMH, founded by billionaire Bernard Arnault, has already been expanding its presence in South Korea. Celine opened its first boutique there in December last year, and Fendi launched its first flagship in 2023.

Other luxury groups are also betting on the South Korean market. Cie Financière Richemont SA — which saw its sales rise 20% in the country for the financial year ended in March — opened a new flagship for Swiss watchmaker Vacheron Constantin in Seoul in June. The store features Korean artworks, a digital archive, a private lounge, and a dedicated space for exhibitions and events. Hermès also relocated and expanded its flagship in the capital, reopening the location in August.