This year’s Spring Economic Forecast reflects the impact on the EU economy of the recent outbreak of conflict in the Middle East. In the wake of the conflict’s energy shock that drove up energy commodity prices, the forecast projects weaker economic activity as inflation rises. The situation is set to improve slightly in 2027 if tensions on energy markets ease.
Currently, GDP growth in the EU is projected to slow down to 1.1% in 2026 from 1.5% in 2025. Growth projections for the euro area are similarly revised down, to 0.9% in 2026 and 1.2% in 2027. Inflation in the EU is expected to reach 3.1% in 2026—a full percentage point higher than previously forecast—easing again to 2.4% in 2027.
Consumption is expected to remain the main driver of growth, even though consumer confidence has dropped to a 40-month low amid fears of job losses and rising inflation. The EU’s investment in energy resilience, especially in the aftermath of Russia’s full-scale invasion of Ukraine, has also left the EU economy better placed to absorb today’s energy shock.
The EU job market is set to be affected, with the long-term decline in the unemployment rate projected to come to an end, stabilising at around 6% in 2027. In 2026, employment growth is forecast to slow down to 0.3%, edging up again to 0.4% in 2027. Nominal wage growth is set to remain strong, as wages adjust to higher inflation.
The energy shock also adds a new burden to public finances. The general government deficit in the EU is expected to increase from 3.1% of GDP in 2025 to 3.6% by 2027. This reflects subdued economic activity, higher interest expenditure, measures to cushion the impact of higher energy prices on vulnerable households and firms, and increased defence spending.
The European Commission’s Autumn 2026 Economic Forecast will update these projections in November 2026.
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Full document: Spring 2026 Economic Forecast: Slowdown in growth as energy shock drives up inflation
