EU GDP Growth Revised Up, Inflation Expected to Drop

The European Commission has revised down its Eurozone GDP growth forecast for the coming years, citing inflation pressures from the Middle East conflict, according to the Spring 2026 Economic Forecast. The bloc’s GDP is now projected to grow by 0.9% this year, down from a previous forecast of 1.2%, while the 2027 outlook has also been lowered to 1.2% from 1.4%, as the impact of the energy shock is set to extend into next year. Among the Eurozone’s largest economies, Germany’s GDP growth was cut to 0.6% for 2026 and 0.9% for 2027, down from previous estimates of 1.2% for both years. France’s growth is forecast at 0.8% in 2026 (down from 0.9%) and 1.1% in 2027. Italy’s growth was lowered to 0.5% for 2026 and 0.6% for 2027, down from 0.8% previously. Spain is expected to outperform, with growth at 2.4% in 2026 (up from 2.3%) and 1.9% in 2027. Inflation in the bloc is now projected at 3.0% for 2026, up from 1.9% in the previous estimate, before easing to 2.3% in 2027.

The Eurozone economy expanded 1.5% in 2025, up from 0.9% in 2024 and exceeding the European Commission’s projection of 1.3%. Economic activity was supported by resilient household consumption, benefiting from lower borrowing costs and easing inflation, a surge in exports to the US as companies stocked up ahead of tariffs under the Trump administration, and stronger-than-expected investment in both equipment and intangible assets. Looking ahead, both the European Commission and the ECB expect growth to moderate to 1.2% in 2026, amid ongoing geopolitical tensions and trade policy uncertainty, before rebounding slightly to 1.4% in 2027.

The European Commission has upgraded its growth forecast for the Eurozone economy in 2025 to 1.3%, up from 0.9% projected in its spring forecasts, according to the Autumn update. Growth is then expected to slow slightly to 1.2% in 2026, before rising to 1.4% in 2027. The EC noted that economic activity exceeded expectations in the first nine months of the year, supported by a surge in exports to the US as companies stocked up ahead of Trump’s tariffs, and stronger-than-expected investment in equipment and intangible assets. Among major Eurozone economies, Germany is projected to grow 0.2% in 2025 (up from -0.2%), rebounding to 1.2% in 2026 and 2027. France is expected to expand 0.7% this year (down from 1.2%), rising to 0.9% in 2026 and 1.1% in 2027. Spain will outperform with growth of 2.9% in 2025, 2.3% in 2026, and 2.0% in 2027, while Italy is set to grow 0.4% in 2025, and 0.8% in 2026 and 2027.