The European Union has announced a downward revision of its economic growth forecast for the eurozone in 2026, pointing to escalating international trade disputes as the primary cause for concern.
Revised Forecasts and Economic Headwinds
On Monday, November 17, 2025, the European Commission revealed its latest economic projections. The executive body now anticipates the 20-nation eurozone will expand by just 1.2 percent in 2026, a reduction from its previous estimate of 1.4 percent made earlier in the year.
EU Economy Chief, Valdis Dombrovskis, explicitly linked this downgrade to global trade policies. He informed reporters in Brussels that actions by the United States and subsequent reactions from major economies like China are expected to suppress worldwide trade volumes. "The EU's highly open economy remains susceptible to ongoing trade restrictions and uncertainty," Dombrovskis stated.
A Silver Lining in Trade Deals and Inflation
Despite the challenging outlook, the Commission acknowledged some positive developments. A trade agreement struck in July with US President Donald Trump prevented a potentially devastating scenario. Instead of facing a threatened 30 percent tariff, EU exports to the US will now be subject to a baseline levy of 15 percent. This deal, according to the EU, has "alleviated some of the uncertainties" for European businesses.
In a significant piece of good news for consumers, the forecast for inflation appears more favourable. The Commission predicts inflation in the eurozone will hit 2.1 percent in 2025, nearly meeting the European Central Bank's target. For 2026, it is expected to dip to 1.9 percent, which is below the target but higher than a previous May forecast of 1.7 percent. Dombrovskis hailed this as a "sustained return to stable prices," offering relief after years of eroded purchasing power.
Mixed Fortunes for Europe's Economic Powerhouses
The report presented a nuanced picture for the bloc's largest economies. Germany, Europe's biggest economy, received a slight upgrade for 2025, with growth now expected at 0.2 percent instead of stagnation. Its forecast for 2026 was also nudged up to 1.2 percent. However, the Commission cautioned that the positive effects of public spending are being counterbalanced by the negative impact of trade tensions on German exports.
France, the second-largest economy, faces its own challenges. While its 2025 growth outlook improved to 0.7 percent, the forecast for 2026 was cut sharply from 1.3 percent to 0.9 percent. The Commission attributed this to "domestic economic and policy uncertainty" in France.
Looking at the broader 27-country European Union, growth is now projected at 1.4 percent for 2026, slightly lower than the 1.5 percent predicted in May. Dombrovskis remained cautiously optimistic, noting that the EU's economy had outperformed expectations in the first nine months of 2025 and was poised for continued, though moderate, growth.
