European Economic Forecast Spring 2026 (European Commission)

Summary

• The virtual closure of the Strait of Hormuz has curtailed seaborne flows of oil and LNG by around 15% and 20% respectively.p.17
• Global growth (excluding the EU) is projected at 3.1% in 2026 and 3.5% in 2027.p.18
• Gross fixed capital formation is expected to grow by only 2.2% in 2026 and 2.0% in 2027, versus a 2.8% increase in 2025.p.20
• EU exports are expected to grow by only 0.9% in 2026, before accelerating to 2.1% in 2027.p.21
• The current account surplus is projected to fall from 2.4% of GDP in 2025 to 1.7% in 2026 and 1.6% in 2027.p.21
• The EU aggregate general government deficit is projected to rise from 3.1% of GDP in 2025 to 3.6% in 2027.p.21

Key insights

1. North Sea Dated Brent rose by around 55 USD/bbl during March, its largest monthly increase on record, and peaked at approximately 140 USD/bbl in early April.p.24
2. Oil and gas prices are expected to peak in the current quarter and decline to around 20% above pre-war levels by end 2027.p.19
3. Employment expanded by 0.5% in 2025, bringing the total number of jobs created since 2019 to around ten million.p.20
4. Employment growth is projected to slow to 0.3% in 2026 and 0.4% in 2027, with the unemployment rate stabilising at around 6%.p.20
5. The ECB brought its policy rate to 2% in June 2025 and has kept it at this level since then.p.28
6. The merchandise balance is expected to decline to 1.2% of GDP in 2026 and 1.1% in 2027.p.21