Middle East Conflict Prompts Economists to Cut Euro Zone 2026 Growth Forecast

Economists have lowered their forecast for euro zone economic growth in 2026 after fighting in the Middle East resumed. According to Jin10, a survey conducted from July 3 to 8 showed that economists expected the euro zone economy to grow more weakly this year than previously forecast. The median forecast from 56 economists put euro zone growth in 2026 at 0.5%, down from 0.7% expected last month and below the European Central Bank’s baseline scenario of 0.8%. Economists also lowered their growth forecast for 2028, while keeping their forecast for next year unchanged. The respondents’ median forecast for inflation this year was 2.8%, slightly lower than last month, which they attributed to a sharp earlier drop in oil prices. However, the forecast remained well above the European Central Bank’s 2% target. Respondents expected the European Central Bank to raise interest rates again in September, and they forecast the first rate cut would come in September 2027.