The European Commission has lowered its economic forecast for the current year, announcing updated autumn projections on Thursday. According to the Brussels body, the EU economy is now expected to grow by 1.1% in 2026 and 1.4% in 2027.
The forecast numbers varied for specific regions. The Eurozone is projected to grow by 0.9% in 2026 and 1.2% in 2027 (compared to previous estimates of 1.2% and 1.4%). Germany, in particular, saw a significant reduction in its growth forecast for 2026, which was cut from 1.2% to 0.6%. However, the German economy is still expected to grow by 0.9% in 2027.
Regarding pricing, the EU’s inflation rate is estimated to reach 3.1% in 2026-a full percentage point higher than previously forecast-before declining to 2.4% in 2027. The Euro area is specifically predicted to see inflation of 3.0% in 2026 and 2.3% in 2027.
The primary reason for these adjustments is the conflict in the Middle East, which has triggered a severe energy shock. Prior to this conflict in February 2026, the EU was on a path of moderate growth with diminishing inflation. However, the economic situation changed dramatically with sharp increases in energy prices, causing economic activity to slow. As a net energy importer, the EU is particularly vulnerable to this shock. Rising energy costs increase both household budgets and business expenditures, which reduces profits across many industries and redirects income within the EU economy towards energy-exporting nations.
EU Economy Commissioner Valdis Dombrovskis commented, “The conflict in the Middle East has triggered a severe energy shock, which presents Europe with another test in an already volatile geopolitical and trade policy environment”. He stated that the EU must learn from past crises by providing targeted, time-limited financial support and continuously reducing its reliance on imported fossil fuels.
