The eurozone economy growth rate outpaced market expectations, hitting 0.6% in the first three months of 2025, official data showed Friday.

The EU’s data agency said the 20-country single currency area recorded growth of 0.6% over the January-March period from the previous quarter, up from the 0.3% figure published last month.

That figure was itself a downward revision from a first estimate of 0.4% issued in April.

The increase in exports positively affected the gross domestic product (GDP) growth, with a rise of 1.9% in the eurozone.

Investments also increased by 1.8% in both the euro area and the EU (after +0.7% and +0.6%, respectively).

Among the member states, Ireland saw the highest quarterly increase with 9.7%, followed by Malta with 2.1% and the Greek Cypriot with 1.3%.

Luxembourg’s economy shrank the most in the first quarter, with 1%, followed by Slovenia with 0.8% and Denmark and Portugal, both down 0.5%.

On a yearly basis, the euro area posted a GDP growth rate of 1.5%, with 1.6% for the EU, according to Eurostat.

Meanwhile, employment in the euro area rose by 0.2% on a quarterly basis in the first quarter of 2025, while it posted no change in the EU.

On an annual basis, the eurozone’s employment climbed 0.7%, while the EU’s was up 0.4% in the first quarter.

The eurozone/euro area, or EA20, represents member states that use the single currency-the euro-while the EU27 includes all member countries of the bloc.

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Türkiye and its metropolis, Istanbul, have major potential in the Islamic economic landscape, according to Yousef Khalawi, secretary-general of the AlBaraka Forum for Islamic Economy, citing the diversified economic base, strategic geography and institutional development.

Türkiye’s ambitions took clearer shape last week when officials used a major summit to portray the country’s potential to be a leader in shaping a more integrated, innovation-driven Islamic financial system.

“Türkiye has a great potential, basically because it represents a real, full and comprehensive economy,” Khalawi told an interview with Daily Sabah on the sidelines of the 2nd Global Islamic Economy Summit.

But its advantages lie in the diversity of its economic foundations, he noted.

Those foundations, according to Khalawi, include a strong agricultural sector, a well-developed industrial base, and competitive advancements in services, technology and tourism.

The summit was organized by the AlBaraka Forum for Islamic Economy at the Istanbul Financial Center (IFC), a sprawling development the Turkish government hopes will transform the city into a financial bridge between East and West – and between the conventional and Islamic financial systems.

Khalawi stressed macroeconomic challenges such as inflation and currency volatility, but highlighted Türkiye as a rare example of a Muslim-majority nation with such infrastructure.

“The issue is just that challenges: inflation, foreign exchange rate, but besides that, you have a full economy,” he noted.

“When you consider that as part of the Islamic world, you would have only just a few examples like that. So Türkiye comes on top,” he said.

“For this reason, there is a huge potential.”

Khalawi went on to call Istanbul “one of the top business cities in the Islamic world,” saying that the metropolis “comes in the middle of the world with its own heritage, and with its great expected future.”

“With the potential and with having also the Istanbul Financial Center, with the launch of their (Türkiye’s) first national strategy for Islamic finance, all that will lead anyone to Istanbul,” he noted.

Istanbul is now one of three host cities of the AlBaraka Forum’s flagship summits – alongside Medina, where the forum began in 1981, and London. Plans for a fourth summit in the Far East are underway, according to Khalawi.

‘Lots to be done’

Despite years of steady growth, Islamic finance continues to represent only a small fraction of global financial markets.

Khalawi said a lack of public communication, innovation, regulatory clarity and liquidity tools hampers progress.

“Building the system based on the Islamic banking system is one of the reasons. Most of our experts, and most of the investment, have focused on Islamic banking,” he said.

“Innovation is another issue. Regulatory framework is a third issue, and for example, till now, Islamic banks have hosted their liquidity where? In central banks. And central banks gave them interest, which is impermissible under Islamic law. This will immediately affect your profitability,” Khalawi explained.

“So, until we create an alternative instrument to manage the liquidity, you will always be affected badly by that.”

There are lots that needs to be done, Khalawi said.

Publicity is a part of that, and for this reason, he noted, the forum has been working for over a year on what Khalawi described as “a strategic framework for communication in Islamic economy,” with plans to launch it next year at the Istanbul Financial Center.

Untapped potential

Khalawi also referred to the untapped economic potential given the Muslim world’s demographic weight.

“What’s the number of Muslims across the globe now? We are almost 25% (of the global population). What are the numbers reflecting the volume of their economic impact? It’s still very low compared to 25% of the population,” he noted.

Addressing the summit last week, President Recep Tayyip Erdoğan Erdoğan also emphasized the Muslim world’s underperformance, urging for greater intra-Islamic cooperation in trade, finance and investment.

“Muslims account for 25% of the world’s population, yet Islamic finance assets total only about $2.5 trillion,” Erdoğan said.

“The Organisation of Islamic Cooperation (OIC), which is the largest international organization after the United Nations, consists of 57 member countries. However, their share in global trade is only around 11%,” he noted.

“In terms of population, we represent 25% of the world, yet our contribution to the global economy is approximately 9%.”

Beyond banking, finance

Khalawi went on to emphasize that the Islamic economy should be viewed beyond the narrow lens of banking and finance.

“When we talk about Islamic economy, we talk about it as a holistic system … it covers everything, including what they call today the socio-economy,” he said.

He dismissed the notion that Islamic finance should be viewed merely as an alternative to the conventional banking system.

“Islamic economy is not something new. The new is the modern Islamic economy, which started like five decades ago through Islamic banking. But the rest of the ecosystem of Islamic economy is much more beyond that, and it’s working now for almost 14 centuries.”

Asked whether the Islamic economy offers solutions to today’s global economic challenges, Khalawi said, “Theoretically, yes. Practically, we still miss strong innovations.”

He explained that while the philosophical and theological underpinnings of Islamic economy are robust, rooted in the Quran, Sunnah and centuries of history, today’s practitioners must adapt these principles to modern economic realities.

“The ecosystem of the economy has been changed … You cannot just implement that experience today.”

This adaptation, he said, requires investment in capacity building.

At this year’s summit, three workshops addressed critical issues: sukuk (Islamic bonds), the halal sector, and the Islamic economy’s growth potential fueled by the global Muslim population.

“So when leaders understand that potential, they will invest more in developing more products and areas,” Khalawi said.

President Donald Trump said Thursday that his call with Chinese leader Xi Jinping ended on a “very positive note,” adding that the two countries will soon resume trade talks aimed at resolving their standoff over tariffs and rare earth mineral supply chains.

It was the first call between the two men since Trump took office for his second term more than four months ago.

“Our respective teams will be meeting shortly at a location to be determined,” Trump wrote on his social media platform.

Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer will represent the U.S. side in negotiations.

The Republican president also said Xi “graciously” invited him and first lady Melania Trump to China, and Trump reciprocated with his own invitation for Xi to visit the United States.

The Chinese foreign ministry said Trump initiated the call between the leaders of the world’s two biggest economies.

Xinhua, the Chinese state media outlet, said Xi asked Trump to “reverse the negative measures” that the U.S. has taken against China. It also reported that Trump said Chinese students were welcome to study in the U.S., although his administration has vowed to revoke some of their visas.

Comparing the bilateral relationship to a big ship, Xi told Trump that the two sides need to steer carefully in a good direction and for them to “eliminate all kinds of interference and even sabotage,” according to Xinhua.

Trump had declared one day earlier that it was difficult to reach a deal with Xi.

“I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” Trump posted Wednesday on his social media site.

Trade negotiations between the United States and China stalled shortly after a May 12 agreement between the two countries to reduce their tariff rates while talks played out. Behind the gridlock has been the continued competition for an economic edge.

The U.S. accuses China of not exporting critical minerals, and the Chinese government objects to America restricting its sale of advanced chips and its access to student visas for college and graduate students.

Trump has lowered his 145% tariffs on Chinese goods to 30% for 90 days to allow for talks. China also reduced its taxes on U.S. goods from 125% to 10%. The back and forth has caused sharp swings in global markets and threatens to hamper trade between the two countries.

Treasury Secretary Scott Bessent had suggested that only a conversation between Trump and Xi could resolve these differences so that talks could restart in earnest. The underlying tension between the two countries may still persist, though.

Even if negotiations resume, Trump wants to lessen America’s reliance on Chinese factories and reindustrialize the U.S., whereas China wants the ability to continue its push into technologies such as electric vehicles and artificial intelligence that could be crucial to securing its economic future.

The United States ran a trade imbalance of $295 billion with China in 2024, according to the Census Bureau. While the Chinese government’s focus on manufacturing has turned it into a major economic and geopolitical power, China has been muddling through a slowing economy after a real estate crisis and coronavirus pandemic lockdowns weakened consumer spending.

Trump and Xi had last spoken in January, three days before Inauguration Day. The pair discussed trade then, as well as Trump’s demands that China do more to prevent the synthetic opioid fentanyl from entering the United States.

Trump had long expressed optimism about the prospects for a major deal, before his post suggesting Xi was making that difficult. Last week, Trump went further, posting, “The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” Trump posted. “So much for being Mr. NICE GUY!”

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The grounding of planes by budget carrier Wizz Air took a toll on the company’s annual profits, the company said Thursday, sending its shares plummeting.

Wizz Air had 37 aircraft grounded as of May 9. By the end of the first half of its 2026 financial year, it expects 34 aircraft to remain grounded, with a repair shop visit expected at around 300 days.

The planes have been affected by problems with RTX-owned Pratt and Whitney engines, limiting the airline’s ability to increase capacity. It has issued two profit warnings in the past year.

“You look at the performance of the supply chain, of the industry and there are cracks all over the place,” Chief Executive Jozsef Varadi told Reuters in an interview.

Varadi previously said he expected the airline to be impacted by the engine repair issues for another two to three years.

“We have the benefit of more than a year of experience operating under these unique circumstances – conditions airlines would never experience when demand exceeds supply,” he said in the statement on Thursday.

Operating profit for the financial year that ended on March 31 fell 61.7% from a year ago to 167.5 million euros ($191 million), missing the 246 million euros projected by analysts polled by LSEG.

The London-listed shares fell 26% at 9:10 a.m. GMT, dropping 48% year-on-year to continue the carrier’s streak as the worst stock performer among European airlines. Wizz Air has subsidiaries in Hungary, Britain, Abu Dhabi and Malta.

That appeared to weigh on other airlines, with Lufthansa, easyjet and British Airways-owner IAG down between 1.5% and 2.7%.

European airlines have warned of longstanding delivery delays and uncertainty around maintaining a boom in post-COVID-19 demand amid economic turmoil tied to U.S. President Donald Trump’s tariff threats.

The sector has, however, benefited from lower fuel prices. Wizz said ticket prices were slightly lower than last year.

Analysts have pointed to other potential rising costs. In particular, costs due to the retirement of Wizz’s A320ceo fleet are projected for next year.

The company said it would not provide guidance for 2026 at this stage of the year, citing limited visibility.

However, it noted that its delivery schedule from Airbus had also been pushed back.

“Given lease returns, the fleet is now forecast to grow from 231 aircraft as at the end of March 2025 to 305 aircraft as at the end of March 2028; this compares to the previous forecast of 380 aircraft at that end date,” it said in the statement.

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The European Central Bank (ECB) again slashed interest rates on Thursday, as expected, while keeping all options on the table for its next meetings, even as the case grows for a summer pause in its year-long easing cycle.

The ECB lowered the key rate by 0.25 percentage points to 2%.

The ECB has now lowered borrowing costs eight times, or by 2 percentage points since last June, seeking to prop up a eurozone economy that was struggling even before erratic U.S. economic and trade policies dealt it further blows.

With inflation now safely in line with its 2% target and the cut well-flagged, the focus has shifted to the ECB’s message about the path ahead, especially since at 2%, rates are now in the “neutral” range where they neither stimulate nor slow growth.

The central bank for the 20 countries that share the euro offered few hints in its statement, however, sticking to its mantra that decisions would be taken meeting-by-meeting and based on incoming data.

“The Governing Council is not pre-committing to a particular rate path,” the ECB said. “Interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.”

ECB President Christine Lagarde’s 12:45 p.m. GMT news conference may offer more clues about the months ahead, with the bank’s most aggressive easing cycle since the 2008/2009 Global Financial Crisis expected to start winding down.

Investors are already pricing in a pause in July, and some conservative policymakers have advocated a break to give the ECB a chance to reassess how exceptional uncertainty and policy upheaval both at home and abroad will shift the outlook.

While ECB board member and chief hawk Isabel Schnabel has made explicit calls for a pause, others have been more cautious, and Lagarde is likely to stick to language that leaves the ECB’s options open, as the outlook is prone to sudden changes.

The case for a pause rests on the premise that the short- and medium-term prospects for the currency bloc differ greatly and may require different policy responses.

Inflation could dip in the short term – possibly even below the ECB’s target – but increased government spending and higher trade barriers may add to price pressures later.

The added complication is that monetary policy impacts the economy with a 12-to-18-month lag, so support approved now could be giving help to a bloc that no longer needs it.

Investors still see at least one more rate cut later this year, however, and a small chance of another move later on, especially if U.S. President Donald Trump’s trade war intensifies.

Divergent outlook

Acknowledging near-term weakness, the ECB cut its inflation projection for next year.

Trump’s tariffs are already damaging activity and will have a lasting impact, even if an amicable resolution is found, given the hit to confidence and investment.

“A further escalation of trade tensions over the coming months would result in growth and inflation being below the baseline projections,” the ECB said. “By contrast, if trade tensions were resolved with a benign outcome, growth and, to a lesser extent, inflation would be higher than in the baseline projections.”

This sluggish growth, along with lower energy costs and a strong euro, will curb price pressures.

Indeed, most economists think inflation could fall below the ECB’s 2% target next year, triggering memories of the pre-pandemic decade when price growth persistently undershot 2%, even if projections show it back at target in 2027.

Further ahead, the outlook changes significantly.

The European Union is likely to retaliate against any permanent U.S. tariffs, raising the cost of international trade. Firms could meanwhile relocate some activity to avoid trade barriers, but changes to corporate value chains are also likely to raise costs.

Higher European defence spending, particularly by Germany, and the cost of the green transition could add to inflation, while a shrinking workforce due to an ageing population will keep wage pressures elevated.

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The trade war fed by U.S. President Donald Trump presents an even tougher challenge for emerging market policymakers than the COVID-19 crisis five years ago, a top official at the International Monetary Fund (IMF) has warned.

The shock from the trade war brings “differential effects” for central banks in emerging markets, in contrast with the COVID-19 pandemic, when they could quickly ease monetary policy, the IMF’s Gita Gopinath said, according to an interview published on Thursday.

In an interview with the Financial Times (FT) newspaper, the fund’s first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder.

“This time the challenge is going to be greater for them, compared to the pandemic,” she said.

Federal Reserve (Fed) policymakers have been signalling they are not ready to lower interest rates until they are sure tariffs will not further stoke inflation. Some estimates predict the inflation in the U.S. could go up in the short term due to the impact of Trump’s tariffs, which are expected to make goods, from shoes to phones, more expensive for ordinary Americans.

Elsewhere, the Bank of England (BoE) and the European Central Bank (ECB) have pivoted to easing monetary policy as inflation slowed down from the peaks observed in 2022 and due to widely stagnating or low growth.

However, in emerging markets, which are also facing higher U.S. trade barriers, the situation looks “more like a demand shock,” said Gopinath, which means slower inflation and growth.

The situation contrasts with the onset of the pandemic, when most central banks around the world slashed interest rates.

“When we have this kind of a divergence, you could end up with tightening global financial conditions, and emerging markets are particularly sensitive to such changes in global markets,” Gopinath told the FT.

Emerging market currencies and stocks have largely rebounded in the two months since Trump announced his sweeping “reciprocal” tariffs, as investors bet that central banks will be largely free to stimulate their economies despite the risk that higher rates in developed countries will draw capital away.

However, a report from the Organisation for Economic Co-operation and Development (OECD) warned that “the risk of disruptive capital flows has risen in emerging market economies.”

Still, Gopinath noted that “emerging market central banks have built up credibility over time, and several have moved to inflation-targeting frameworks,” which she said was very positive.

She added: “Global factors are still bigger drivers for them compared to advanced economies, and so when we’re entering this environment where we are seeing major shifts in global economic policy, along with the uncertainty, this will present a challenge to them.”

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