Brussels Lowers Eurozone Growth Forecast Amid Global Trade Uncertainty

The European Union has lowered its growth forecast for the Eurozone for 2026, as risks from international trade and geopolitical tensions cast a shadow over the European economy.

Lowered Growth Forecasts and Inflation Expectations

The European Commission, on Monday, projected that the 20-nation single-currency area will grow by 1.2% in 2026, a decrease from previous forecasts of 1.4%.

• EU 27 Forecast: The forecast for the entire 27-member EU was also lowered slightly to 1.4% for 2026, down from the 1.5% announced in May.

• Inflation Outlook: The Commission raised its inflation forecast for the Eurozone to 1.9% in 2026 (up from the previous 1.7%). It also predicted inflation would reach 2.1% in 2025, nearing the European Central Bank's 2% target.

Trade Uncertainty Undermines Economic Activity

The Commission emphasized that Europe’s "highly open economy" remains "exposed to persistent trade restrictions."

• Concerns: The Commission stated in a release: "Continued uncertainty regarding trade policies casts a shadow over economic activity, with tariff and non-tariff barriers potentially hindering EU growth more than expected."

• Cautious Optimism: Despite the difficult conditions, Economic Affairs Commissioner Valdis Dombrovskis remained optimistic, stating that "even in challenging economic conditions, the EU economy has continued to grow."

Note on Inflation:

The Commission noted that the slowdown in food and service price increases was "offset by a rise in energy price inflation."