The European Union on Monday lowered its eurozone growth forecast for 2026, citing risks from international trade and geopolitical tensions. The European Commission now expects the 20-country euro area to expand by 1.2 per cent, down from an earlier projection of 1.4 per cent.
Brussels warned that Europe’s “highly open” economy remains vulnerable to trade restrictions, although recent US trade agreements with partners, including the EU, have eased some uncertainties. “Persistent trade policy uncertainty continues to weigh on economic activity, with tariffs and non-tariff restrictions potentially constraining EU growth more than expected,” the commission said.
For the broader 27-country EU, growth is forecast at 1.4 per cent in 2026, slightly below May’s estimate of 1.5 per cent.
EU economic chief Valdis Dombrovskis struck a cautiously positive tone, stating, “Even in an adverse environment, the EU’s economy has continued to grow.”
The Commission also raised its forecast for eurozone inflation to 1.9 per cent in 2026, up from 1.7 per cent, while projecting 2025 inflation at 2.1 per cent—close to the European Central Bank’s two-percent target. Although food and services price increases are slowing, rising energy costs are expected to offset these gains.
