Eurozone outlook 2026

The Eurozone economy outperformed expectations in 2025, supported by resilient household consumption and frontloaded trade flows. Growth is projected to soften somewhat in the near term and to reaccelerate over the course of 2026. Improved financing and price conditions, defense spending, and resilient households will soften the blow of ongoing trade tensions, fiscal restraints and competitiveness issues. We forecast economic growth of 1.4% in 2025, 0.9% in 2026 and 1.2% in 2027. Fiscal support will pull Germany out of stagnation, yet it’s Spain that will continue to lead among peers. Our fairly decent growth outlook masks risks related to rapidly changing geopolitics. Inflation should hover near the ECB’s target over the next two years.