Chief Economists Outlook May 2025

14Chief Economists Outlook This is connected to policy developments in the US, which appear to have galvanized the sense among European policy-makers that action is needed to bolster their economies, security and societies.26 Germany has taken the lead in this respect. The new coalition government has introduced a dramatic overhaul of the country’s fiscal framework, including a relaxation of constitutional debt constraints to allow for sharp increases in infrastructure and defence spending.27 Half of the surveyed chief economists expect that this change in Germany’s fiscal stance will drive an acceleration of growth across the continent. Figure 10. German fiscal pivot Looking ahead to the remainder of 2025, do you agree/disagree with the following? Germany will drive an acceleration of European growth Share of respondents (%)3 18 29 45 5Strongly disagree Disagree Uncertain Agree Strongly agree Source: Chief Economists Survey. (2025, April). Monetary policy is also expected to lend some support to European growth, with 76% of respondents anticipating continued monetary policy loosening. The European Central Bank cut its key policy rate to 2.25% in April, the seventh cut it has made since June 2024.28 It has been helped by a favourable inflation environment, which will likely give it the room to continue lowering rates: according to chief economists, inflation is expected to remain moderate (54%) or low (31%) this year. Figure 11. China in the remainder of 2025 Economic growth Very weak Weak Moderate Strong Very strong Inflation Fiscal policy Monetary policyVery low Low Moderate High Very high Looser Unchanged Tighter Looser Unchanged Tighter20 27 87 73 271342 3069 11 Source: Chief Economists Survey. (2025, April).East Asia and the Pacific 26 Foy, H. & Hall, B. (2025). 27 Tagesschau.de (2025).28 Storbeck, O. & Smith, I. (2025).