Economic growth in the European Union and the Eurozone is expected to remain modest in 2026, broadly in line with or slightly below 2025 levels, according to the latest outlooks from analysts, banks and EU institutions. A firmer acceleration is, however, anticipated in 2027.

According to a December 2025 report by KPMG, Eurozone GDP is forecast to grow by 1.1% in 2026, following estimated growth of 1.3% in 2025. The firm points to resilient labour markets and real wage growth as factors supporting household incomes. At the same time, subdued consumer confidence—particularly in major economies such as France and Germany—is leading households to save more, limiting growth in consumption.

KPMG notes that there are early signs of improvement, driven by rising investment in digital infrastructure and the green energy transition. It also expects more expansionary fiscal measures in 2027, including higher public spending on defence and infrastructure.

Central bank policy and cautious optimism

The Official Monetary and Financial Institutions Forum (OMFIF) also sees reasons for cautious optimism in the Euro area in 2026, while highlighting several downside risks. It points to the fact that the European Central Bank reduced its deposit facility rate at its first four meetings in 2025 and that inflation is now close to the ECB’s 2% target.

OMFIF highlights the ECB’s latest projection that Euro area GDP will grow by 1.2% in 2026. While this would be below the 1.4% growth estimated for 2025, it represents an upward revision from the 1.0% forecast issued in September. According to OMFIF, the revision reflects a looser fiscal stance, particularly in Germany, where public investment of around €127 billion is projected for 2026. Strong private consumption and increased private-sector investment—especially in artificial intelligence—are also supporting the outlook. Additional momentum is expected from EU-funded investment programmes in southern European countries.

Risks to the outlook include ongoing geopolitical uncertainty, notably linked to the war in Ukraine, as well as the potential resurgence of international trade tensions.

EU-wide outlook from ECFIN

The European Commission’s Directorate-General for Economic and Financial Affairs (ECFIN) struck a slightly more optimistic tone in its Autumn Forecast, published on November 17, 2025. According to ECFIN, EU economic growth exceeded expectations in 2025, reaching 1.4%, and is forecast to remain at this level in 2026 before rising to 1.7% in 2027.

For the Eurozone, ECFIN estimates growth of 1.3% in 2025, easing to 1.2% in 2026, before strengthening again to 1.4% in 2027.

On the trade side, EU goods export growth is expected to slow in 2026 due to high global tariffs, with a rebound projected in 2027. In contrast, exports of services are forecast to grow robustly throughout the period. Goods imports are expected to follow a similar trajectory to exports but to expand at a faster pace.

According to ECFIN, strong import growth will partly reflect trade diversion linked to US tariffs on imports from third countries. China’s relatively large share of US goods imports and the high tariffs it faces are expected to lead to a redirection of some Chinese exports towards other markets, including the EU.

Overall, the outlook for 2026 points to restrained but stable growth in both the EU and the Eurozone, underpinned by easing inflation, supportive labour markets and investment, while the prospect of stronger fiscal support and investment spending offers scope for a more pronounced recovery in 2027.