The Organisation for Economic Co-operation and Development (OECD) has sharply lowered its growth forecast for the eurozone for 2026, citing the economic impact of the Middle East conflict which has driven energy prices higher. In its latest economic outlook, the Paris-based institution now projects the currency bloc will grow by just 0.8 per cent, a downgrade of 0.4 percentage points from its previous estimate. The forecast for both Germany and France, Europe’s largest economies, was cut by 0.2 points to 0.8 per cent each.
The revised outlook accompanies a significant upward revision for eurozone inflation, which the OECD now expects to reach 2.6 per cent in 2026, 0.7 points higher than previously forecast. The organisation stated that the “energy price surge and the unpredictable nature of the evolving conflict in the Middle East will raise costs and lower demand,” counteracting positive factors like technology investment and lower tariffs.
Global growth for 2025 is maintained at 2.9 per cent, but the OECD noted that without the escalation in the Middle East, worldwide expansion could have been 0.3 percentage points higher this year. The report assumes energy market disruptions will begin to ease from mid-2026, though it emphasises the high uncertainty surrounding the conflict’s duration. A prolonged period of elevated energy costs would “add markedly to business costs and raise consumer price inflation, with adverse consequences for growth,” the report warned.
The analysis highlights specific commodity pressures, noting a more than 40 per cent rise in urea—a key nitrogen fertiliser—since mid-February, which threatens to reduce crop yields in 2027.
In contrast, the United States is forecast to be more resilient. Following 2.1 per cent growth in 2025, the US economy is now projected to expand by 2.0 per cent in 2026, a 0.3-point upgrade. Growth is then seen slowing to 1.7 per cent in 2027 as strong artificial intelligence-related investment is offset by decelerating real income and consumer spending.
China’s growth forecast remains relatively stable, with 4.4 per cent expected for 2025 and 4.3 per cent for 2027. The OECD attributes the gradual slowdown to the expiry of consumption subsidies, higher energy import costs, and the ongoing property sector correction.
To build resilience against future energy shocks, the OECD urged policies that enhance domestic energy efficiency and reduce reliance on imported fossil fuels. It also recommended agreements to ease trade tensions, stating they would “improve policy certainty and strengthen the prospects for sustainable growth.”
Reporting by AFP. The post OECD Cuts 2026 Eurozone Growth Forecast Over Mideast War appeared first on Channels Television.
