Economic resilience is highlighted amid trade turbulence, with the Eurozone's Q4 GDP preliminary value at 0.3%, exceeding expectations, and Germany achieving its best quarterly performance in three years

Despite the uncertainties brought about by the turbulent trade environment dominated by the United States, the Eurozone economy demonstrated unexpected growth resilience at the end of last year. The main driver of growth in the previous quarter came from domestic demand, with accelerated consumption and investment activities effectively offsetting the drag from weak exports, resulting in overall economic performance exceeding expectations.

On January 30, the European Union's statistical office released data showing that the Eurozone's fourth quarter 2025 GDP preliminary quarter-on-quarter growth rate was 0.3%, higher than the market's general expectation of 0.2%, and unchanged from the previous value; the year-on-year preliminary growth rate was 1.3%, in line with expectations, slightly lower than the previous value of 1.4%.

From the perspective of major member countries, growth showed a divergent pattern. Germany's GDP grew by 0.3% in the fourth quarter, outperforming preliminary estimates. Spain once again became the main driver of growth in the Eurozone, with an impressive economic growth rate of 0.8%. France and Italy's economies grew by 0.2% and 0.3%, respectively. Additionally, most other member countries, including the Netherlands and Austria, also recorded positive growth.

Despite suffering direct impacts from U.S. tariffs last year, the Eurozone economy still demonstrated fundamental resilience. With Germany recently launching a large-scale fiscal spending plan to stimulate its long-dormant economy, the market expects the overall economic growth in the Eurozone to accelerate to over 1% in 2026.

However, it is still too early to assert a comprehensive and robust recovery. The main risks lie in the recent new trade threats issued by the Trump administration regarding issues such as Greenland, while the continued strengthening of the euro exchange rate may weaken the competitiveness of exporters in the region, bringing uncertainty to future economic growth.

Divergent Performance of Major Economies

From the performance of member countries, Spain continues to lead the Eurozone with a quarter-on-quarter growth rate of 0.8%, exceeding expectations. Germany's economy recorded a growth of 0.3%, marking its best quarterly performance in three years. ING economist Carsten Brzeski commented on this:

“Although Germany's fourth quarter growth was modest, it is the strongest quarterly performance in the past three years. The increase in new orders and the decrease in inventory levels suggest that its industrial sector will at least see a mild improvement.”

Italy's economic growth also exceeded expectations, reaching 0.3%. Meanwhile, France's growth rate, affected by domestic political instability, met expectations at 0.2%.

It is noteworthy that Ireland's data statistically dragged down the overall Eurozone figures due to a significant contraction in its large multinational corporate sector (mainly established for tax incentives). However, this is more of a statistical effect, reflecting global fluctuations in multinational companies' profits or activities, and does not represent a contraction in Ireland's actual domestic economy.

Positive Start to 2026

Other recent data shows that the Eurozone has shown relatively strong momentum at the start of 2026. A key confidence index unexpectedly surged, primarily driven by France and Germany, with broad growth achieved across all major industries.

At the same time, multiple indicators point to positive trends: the industrial sector shows signs of stabilization, the household sector has finally begun to lower its historically high savings rate, the unemployment rate continues to remain close to record low levels, and inflation stabilizes around the European Central Bank's target of 2%. **

Germany's spending boom in infrastructure and defense provides additional momentum for economic growth prospects. Although the initiation of related investment projects may be relatively slow, their substantial contribution to growth is expected to become evident starting in the second quarter. This is not only expected to end Germany's three-year economic stagnation but also strongly support other regions in Europe, as Germany's industrial system relies on a vast supplier network spread throughout the Eurozone.

Trade patterns are undergoing structural reshaping

However, exports are unlikely to fully recover in the short term. The U.S. tariff policy and the weak performance of the dollar over the past year point to a potential structural shift in global trade patterns.

This places more responsibility on domestic demand to find new growth points. However, economists point out that there is still ample potential to be tapped in the consumption sector and intra-EU trade, which maintains a relatively optimistic medium-term outlook.

Current mainstream forecasts indicate that the economic growth rate in the Eurozone will remain in the range of 1.2% to 1.5% over the next few years, which is basically in line with its potential growth level. This situation creates an extremely favorable policy environment for the European Central Bank: inflation has reached the target, interest rates are at neutral levels, and economic growth is close to potential levels, which is seen by some policymakers as the ideal state for the central bank.

The market generally expects that the European Central Bank's interest rates will remain stable throughout this year, and this outlook is unlikely to change unless there is a new significant shock