City view shows the Grand Palais and La Defense business district in the background, seen from Notre-Dame Cathedral, in Paris, France, September 19, 2025. Ludovic Marin/Pool via REUTERS

BRUSSELS (Reuters) -The euro zone economy will grow faster than earlier expected in 2025, the European Commission forecast on Monday, mainly thanks to a surge in exports in the first half of the year ahead of expected tariff increases.

The EU executive arm said gross domestic product in the 20 countries that share the euro currency would grow 1.3% this year, rather than 0.9% as forecast last April, up from 0.9% growth in 2024.

In 2026, growth is to slow marginally to 1.2%, a downward revision of the Commission's own 1.4% forecast from April, before accelerating again to 1.4% growth in 2027.

"Initially fuelled by a surge in exports in anticipation of tariff increases, the steady—albeit modest—growth observed so far highlights the resilience of the EU economy in the face of a challenging external environment," the Commission said.

"Inflation is nearing the ECB target, and financing conditions have improved," the forecast said.

Consumer price growth in the euro zone is to slow to 2.1% in 2025 and 1.9% in 2026 from 2.4% last year, the Commission said.

But despite the faster growth, public finances are to deteriorate, with the euro zone aggregated budget deficit rising to 3.2% of GDP this year from 3.1% last year and expanding further to 3.3% in 2026 and 3.4% in 2027.

Aggregated euro zone public debt is also to increase, the Commission said, going up to 88.8% of GDP this year from 88.1% in 2024 and then to 89.8% in 2026 and 90.4% in 2027.

The budget deficit of the euro zone's biggest economy Germany is to jump to 4.0% of GDP next year from 3.1% this year and 2.7% in 2024, mainly as a result of higher defence spending.

The second biggest euro zone economy France is expected to cut it budget gap to 5.5% of GDP this year from 5.8% in 2024 despite its government crisis, the Commission forecast. The French budget gap is to fall ti4.9% in 2026, it forecast.

(Reporting by Jan Strupczewski)