The following is an adaptation of an article written by Réka Zsuzsánna Máthé, a research fellow at the Europe Strategy Institute of the University of Public Service, originally published in Hungarian on the Five Minutes Europe blog of Ludovika.hu.

According to the latest data from Eurostat, the EU can only maintain its influence in global competition through far-reaching reforms.

A few days ago, Eurostat published data on the European Union’s economic growth last year. In 2025 the world’s three largest economies—the United States, the European Union, and China—posted varying economic performances. They had to contend with very different challenges. The real GDP of these three major powers (though some might dispute whether the EU still qualifies as one) rose, but for different reasons. Political changes, shifts in industry, and—according to official data—the government shutdown in the United States also left their mark.

The European Union showed signs of recovery in 2025 compared to 2024, but these gains were highly uneven. Last year, real GDP in the EU grew by 1.5 per cent, which is slightly stronger than the 1.1 per cent growth in 2024.

At first glance, this seems encouraging, but the differences between countries are striking. Ireland stood out with a massive 12.3 per cent jump in GDP, followed by Malta and Cyprus, both with steady growth above 3 per cent. Germany, the driving force behind the region’s economic growth and Hungary’s most important economic partner, performed the weakest: it showed barely any growth, with the figure improving by a mere 0.2 per cent. The generally strong Finnish economy found itself in a similar situation, with its economy also growing only by 0.2 per cent. Unfortunately, Hungary, likewise, lagged behind the average with its 0.4 per cent growth.

Nevertheless, every single EU member state managed to achieve at least some GDP growth in 2025, which certainly counts as a success. According to official data, household and government spending played a major role in this stable growth, as did robust business and public investment (gross fixed capital formation). Higher wages likely put more money in workers’ pockets, which ensured strong household consumption and helped sustain varying levels of growth.

‘Germany, the driving force behind the region’s economic growth…performed the weakest’

The slowdown in EU growth is primarily linked to the German economy. The German economy accounts for a huge portion of the EU economy, and its dramatic slowdown has held back many countries, preventing the EU from achieving even higher growth figures. This situation highlights the divide: while some industrial centres in Northern and Central Europe struggled, fast-growing economies focused on services and technology—such as Ireland and Malta—surpassed expectations.

At the same time, trade and debt ratios are also key factors: the EU relies heavily on imports and exports, but net trade balances and private-sector debt remain significant in the region. If these issues are not properly addressed, they will continue to hold back future growth.

The US economy grew by 2.2 per cent in 2025, slightly below the 2.8 per cent rate recorded in 2024. Consumer spending continued to rise, and businesses invested at a relatively healthy pace, so the year appeared solid overall. In the fourth quarter, however, GDP barely moved, growing by just 1.4 per cent on an annual basis—well below the 4.4 per cent rate in the third quarter. According to official data, this was due to the federal government shutdown that lasted from October through mid-November. The Bureau of Economic Analysis estimates that this single event reduced quarterly growth by a full percentage point.

In contrast, the private sector continued to grow. Real final sales to private domestic customers rose by 2.4 per cent in the fourth quarter. Inflation remained largely unchanged: the Personal Consumption Expenditures (PCE) price index rose by 2.6 per cent over the year, matching the 2024 figures. Excluding food and energy, core PCE reached 2.8 per cent, which is slightly lower than last year’s figure.

‘2025 was a year of resilience for the world’s largest economies’

It comes as no surprise that China showed the most notable growth, primarily through innovation. China’s economy grew by 5.0 per cent in 2025, meeting its targets. However, it is noteworthy that growth started at 5.4 per cent in the first quarter, then slowed quarter by quarter, closing at 4.5 per cent in the fourth quarter.

The government’s push for ‘new-quality productive forces’ paid off, particularly in high-tech manufacturing, as data shows this sector grew by 9.4 per cent. For example, 3D printer manufacturing jumped by 52.5 per cent, while industrial robots and new energy sources also performed well, growing by 28 per cent and 25.1 per cent, respectively. Services outpaced industry, growing by 5.4 per cent, compared to 4.5 per cent growth in manufacturing and 3.9 per cent in agriculture.

At the same time, investment stalled. Total fixed asset investment fell by 3.8 per cent, driven by a massive 17.2 per cent decline in real estate development, as problems in the Chinese real estate market have not abated. In terms of prices, consumer inflation stagnated—no change for the year—which points to weak domestic demand. Demographic data further exacerbated the challenge. China’s population decreased by 3.39 million, and the natural growth rate fell to -2.41 per thousand.

In summary: 2025 was a year of resilience for the world’s largest economies. The United States—despite temporary political turmoil—maintained its domestic demand-driven growth, while China further strengthened its position in high-tech sectors, even in the face of structural and demographic challenges. In contrast, the European Union’s performance proved both stable and vulnerable: while growth returned, disparities among countries, the slowdown of the German economy, and structural problems limited the region’s dynamism.

Current trends in the global race warn that it is essential for the EU to rethink its economic and industrial policies. If the bloc does not strengthen its innovation base, increase its self-sufficiency in critical raw materials, energy sources, and technological development, and address its internal structural fault lines more effectively, its economic and, consequently, political weight will continue to decline relative to the other two major powers. The current data, therefore, not only show signs of recovery but also serve as a clear warning: to maintain its presence in the global economic arena, the European Union needs far-reaching, long-term reforms and a decisive strategic shift.

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