Link Securities | A Financial Times survey of economists forecasts Eurozone GDP growth of 1.2% for 2026, compared to 1.4% for 2025 and forecasts of 1.4% for 2027. The region’s economic outlook depends heavily on Germany, Europe’s largest economy, which is expected to recover thanks to the strong fiscal expansion announced by the German government. However, there has been disappointment so far with the pace of reforms and doubts about whether they will lead to lasting expansion.
According to these economists, German fiscal stimulus will contribute nearly 1% to German GDP growth next year. For its part, France’s economic outlook is affected by budgetary paralysis. Another supporting factor for the region’s economy will be increased investment in Italy and Spain thanks to the European Union (EU) Recovery Funds.
Conversely, potential obstacles to economic growth in the region include low productivity and competition from Chinese exporters, which are weighing on EU industry. European industrial sectors will also remain under pressure from US tariffs. Furthermore, monetary policy is unlikely to be a key factor, as the ECB is expected to keep its monetary policy unchanged in the medium term. The ECB expects domestic demand to remain the main driver of growth, boosted by rising real wages and a resilient labour market. Thus, while the ECB sees a challenging trading environment for the region, it expects exports to recover.
