The strong performance in Q1 does not necessarily indicate future success in 2025. It is expected that growth momentum will decrease. The predicted growth of 0.8% for this year remains unchanged, but there is concern for a potential recession in the near future. The growth forecast for 2026 has been adjusted to 1.0% (from 1.2%) due to the ongoing impacts of trade uncertainty. Additionally, the forecast for 2027 has been lowered to 1.6% (from 1.1%) as explained by Standard Chartered’s economist Christopher Graham, who notes the effects of German fiscal boost and defence spending. Despite a positive start, there are concerns about the fragile outlook for the euro area in the short term. This is due to the impact of US tariffs on demand for exports and the uncertainty surrounding global trade. Our growth forecast for 2025 remains at 0.8% solely based on the strong performance in Q1. However, there is a high possibility of a recession in the next few quarters, depending on the outcome of US-EU trade negotiations. Our base scenario is that the euro area will face tariffs between 10% and the initial 20% rate, but the situation may worsen and have a greater impact on economic growth. As the euro area works to compensate for lost trade with the US by expanding trade with other regions, the effect of tariffs is expected to decrease. This will result in improved quarterly growth in 2026, although the slow end to 2025 and lasting effects into early next year lead us to lower our full-year growth forecast to 1.0% (from 1.2%). However, a more positive outlook is predicted for 2027, as the negative consequences of trade weaken and beneficial factors such as German infrastructure and continent-wide defence spending contribute to growth. As a result, our 2027 growth forecast is raised to 1.6% (from 1.1%).