The European Union has revised its economic growth forecast for the eurozone in 2026, citing risks from international trade and geopolitical tensions. According to the European Commission, the 20-country single currency area is expected to grow by 1.2 percent in 2026, down from the previous forecast of 1.4 percent. This downward revision reflects the ongoing challenges posed by trade restrictions and uncertainties, which continue to weigh on Europe’s economy.

The European Commission noted that the EU’s “highly open” economy remains susceptible to ongoing trade restrictions, but acknowledged that recent US trade deals with partners, including the European Union, have alleviated some of the uncertainties. Despite these efforts, persistent trade policy uncertainty continues to constrain economic activity, with tariffs and non-tariff restrictions potentially limiting EU growth more than expected.

For the entire 27-country EU, the commission expects growth of 1.4 percent in 2026, slightly lower than the 1.5 percent predicted in May. EU Economic Chief Valdis Dombrovskis struck a positive note, stating that “even in an adverse environment, the EU’s economy has continued to grow.” The commission’s forecast also predicts eurozone inflation to hit 1.9 percent in 2026, up from the previous prediction of 1.7 percent for next year.

Inflation in the single currency area is expected to reach 2.1 percent in 2025, nearing the European Central Bank’s two-percent target. While food and services price rises are slowing, this trend is counterbalanced by rising energy inflation. The commission’s revised forecast reflects the complex interplay of global economic factors and their impact on the EU’s economy. As the EU navigates these challenges, its ability to adapt and respond to shifting trade policies and geopolitical tensions will be crucial in determining its economic trajectory in the years to come.