Financial News: EU Cuts Eurozone Growth Outlook

EU Cuts Eurozone Growth Outlook

(RTTNews) - The European Commission downgraded its growth outlook for the euro area economy citing the unprecedented disruption to global energy markets due to the conflict in the Middle East.

In the Spring Economic Forecast, the commission said the currency bloc is set to grow 0.9 percent this year, slower than the 1.2 percent projected earlier. The forecast for next year was trimmed to 1.2 percent from 1.4 percent. The near-closure of the Strait of Hormuz sharply reduced oil supply, causing severe supply disruptions. The war in Iran has pushed up energy prices and damped confidence. The energy shock is expected to drive euro area headline inflation to 3.0 percent this year compared to the previous forecast of 1.9 percent. The projection for next year was raised to 2.3 percent from 2.0 percent.

The EU expects the European Central Bank to cautiously tighten its monetary policy stance over the coming months.

After two years of recession and weak growth in 2025, the German economy is forecast to grow 0.6 percent this year and 0.9 percent in 2027, underpinned by public spending. The HICP inflation in the biggest euro area economy is projected to spike to 2.9 percent this year before dropping again to 2.7 percent next year.

Spain's real GDP is expected to remain strong at 2.4 percent this year, but to decelerate gradually to 1.9 percent next year, on account of the adverse impact of the conflict in the Middle East.

The EU noted that Spain's economic growth is set to be largely driven by domestic demand, underpinned by robust labor market performance and by investment growth. Spain's HICP inflation is projected to pick up in 2026 to 3 percent, led by the surge in energy prices.

France's economic activity is forecast to grow at a steady pace of 0.8 percent this year. Growth is expected to pick up slightly to 1.1 percent next year as aeronautics and increased orders in the defence industry are set to support investment and net exports, the EU said.

Further, the commission said the fallout from the conflict in the Middle East should lift French inflation to 2.4 percent this year and 1.8 percent in 2027.

Italy's real GDP is expected to log a steady growth of 0.5 percent this year. In 2027, output is set to grow 0.6 percent, supported by a recovery in global trade and price normalization. Inflation is forecast to accelerate to 3.2 percent this year before softening to 1.8 percent next year.

For comments and feedback: contact editorial@rttnews.com

Copyright(c) 2026 RTTNews.com. All Rights Reserved

Market News provided by RTTNews