Euro Area Economic Outlook
Our Consensus is for 2026 GDP growth to decline from 2025 levels, as U.S. tariffs are expected to cap export growth. Still, past ECB rate cuts, Germany’s fiscal stimulus and stronger defense spending in the euro area should buoy domestic demand. Downside risks stem from potential additional U.S. tariffs.
Euro Area Inflation
In December, harmonized inflation fell to 1.9% from the previous month’s 2.1%, falling below the ECB’s 2.0% target for the first time in seven months. In 2026, average inflation should drop just below 2.0% and hit a six-year low as subdued oil prices and a strong euro keep price pressures at bay. The rerouting of goods from China amid U.S. tariffs is a downside risk.
This chart displays Economic Growth (Real GDP, ann. var. %) for Euro Area from 2010 to 2024.
| 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|
| Unemployment (% of active population, aop) | 8.0 | 7.8 | 6.8 | 6.6 | 6.4 |
| GDP per Capita (USD) | 37,556 | 42,319 | 40,899 | 44,559 | 46,132 |
| Economic Growth (Real GDP, ann. var. %) | -6.2 | 6.4 | 3.7 | 0.5 | 0.8 |
| Industrial Production (ann. var. %) | -7.8 | 9.0 | 1.8 | -1.7 | -3.0 |
| Merchandise Exports (USD bn) | 2,397 | 2,876 | 3,024 | 3,050 | 3,044 |
| Merchandise Imports (USD bn) | 2,007 | 2,531 | 3,077 | 2,769 | 2,653 |
| Merchandise Trade Balance (USD bn) | 390 | 345 | -52 | 282 | 391 |
| Current Account Balance (% of GDP) | 1.8 | 2.7 | -0.3 | 1.6 | 2.7 |
| Policy Interest Rate (%, eop) | 0.00 | 0.00 | 2.50 | 4.50 | 3.15 |
| Investment (annual variation in %) | -6.0 | 3.7 | 2.2 | 2.7 | -2.1 |
| Public Debt (% of GDP) | 96.5 | 93.8 | 89.3 | 87.0 | 87.1 |
| Money (ann. var. of M2 %) | 11.0 | 7.1 | 3.6 | -0.8 | 3.2 |
| Private Consumption (annual variation in %) | -7.9 | 4.6 | 5.3 | 0.6 | 1.2 |
| Fiscal Balance (% of GDP) | -7.0 | -5.1 | -3.4 | -3.5 | -3.1 |
| International Reserves (USD bn) | 1,079 | 1,224 | 1,217 | 1,268 | 1,449 |