Report by Link Securities
The European Commission (EC), in its Spring Economic Report 2026, has revised downwards its forecast for Gross Domestic Product (GDP) growth for the European Union (EU) and the Eurozone, citing inflationary pressures arising from the conflict in the Middle East. Thus, the EC has cut its growth forecast for the EU economy for 2026 from 1.4% to 1.1%, and for the Eurozone economy to 0.9% from 1.2%, as well as to 1.2% from 1.4% in 2027, warning that a prolonged closure of the Strait of Hormuz could halve even these new projections. The three largest economies in the Eurozone bear the heaviest burden. Germany is forecast to grow by just 0.6%, compared with the 1.2% estimated in November, whilst France is expected to grow by 0.8% and Italy by 0.5%. Spain will show greater resilience with estimated growth of 2.4% in 2026 (compared to the previous 2.5%) and 1.9% in 2027 (up from 1.8%).
The EC now expects inflation in the EU to stand at 3.1% in 2026, a full percentage point above the autumn estimate. For the Eurozone, it now projects inflation to stand at 3.0% for 2026, up from the previous estimate of 1.9%, before falling to 2.3% in 2027, a rate also revised upwards from 2.0%.
In this regard, it is worth noting that the EC’s Commissioner for the Economy, Dombrovskis, said he sees no obvious solution in sight to the blockage of the Strait of Hormuz. Furthermore, he highlighted that a worst-case scenario would roughly halve the EC’s already downwardly revised growth forecasts and push inflation up significantly.
