Euro Area Economic Outlook
Our panelists upped their forecasts following the stronger-than-expected Q2 GDP reading. Still, economic growth should hit a three-year low in 2026 as the spike in energy costs hurts private consumption. The economy should then regain steam in 2027 thanks to accelerating fixed investment linked to AI capex and defense outlays.
Euro Area Inflation
Inflation rose to 3.2% in August from 3.0% in July, further above the ECB’s 2.0% target, driven by surging energy prices amid renewed U.S.-Iran hostilities. Inflation should hit a three-year high in 2026 and remain above target until 2028 due to high energy prices. Still, inflation in 2026 should be about a third of the 2022 Russia-Ukraine energy crisis peak.
This chart displays Economic Growth (Real GDP, ann. var. %) for Euro Area from 2010 to 2025.
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| Current Account Balance (% of GDP) | 2.7 | -0.2 | 1.7 | 2.5 | 1.7 |
| Merchandise Trade Balance (USD bn) | 340 | -62 | 271 | 354 | 371 |
| Merchandise Exports (USD bn) | 2,879 | 3,025 | 3,058 | 3,050 | 3,244 |
| Merchandise Imports (USD bn) | 2,539 | 3,087 | 2,788 | 2,696 | 2,873 |
| GDP per Capita (USD) | 42,681 | 41,169 | 44,943 | 46,610 | 50,281 |
| Industrial Production (ann. var. %) | 9.0 | 1.9 | -1.7 | -3.0 | 1.7 |
| Unemployment (% of active population, aop) | 7.7 | 6.7 | 6.6 | 6.4 | 6.3 |
| Policy Interest Rate (%, eop) | 0.00 | 2.50 | 4.50 | 3.15 | 2.15 |
| Fixed Investment (ann. var. %) | 3.6 | 2.3 | 2.8 | -2.3 | 3.1 |
| Private Consumption (ann. var. %) | 4.6 | 5.3 | 0.6 | 1.3 | 1.5 |
| Public Debt (% of GDP) | 93.8 | 89.3 | 86.9 | 87.0 | 87.8 |
| Economic Growth (Real GDP, ann. var. %) | 6.4 | 3.7 | 0.6 | 1.0 | 1.3 |
| Fiscal Balance (% of GDP) | -5.1 | -3.4 | -3.5 | -3.0 | -2.9 |
| Money (ann. var. of M2 %) | 7.0 | 3.6 | -0.8 | 3.2 | 3.1 |
| International Reserves (USD bn) | 1,197 | 1,188 | 1,268 | 1,449 | 2,087 |