European Commission cuts GDP forecasts for 2026

(Sharecast News) - The European Commission has cut its forecasts for eurozone economic activity in 2026 with US trade tariffs expected to hold back growth, despite a stronger-than-expected expansion so far this year. The EU now expects gross domestic product across the single-currency region to rise by just 1.2% next year, down from 1.4% previously.

The European Commission said that average tariff rates on US imports are estimated to be higher than calculations in its spring projections. It had previously factored in a 10% tariff rate on EU exports to the States, which has now increased to 15% following this summer's trade deal.

Nevertheless, the EC raised its GDP growth forecast for 2025 to 1.3% from 0.9%.

"This better-than-expected performance was initially due to a surge in exports ahead of anticipated tariff increases, but investment in equipment and intangible assets also performed more strongly than expected - most notably in Ireland, but also in other countries," the EC said in a report on Monday.

Meanwhile, purchasing managers' indices in October have suggested "continuing growth momentum in the coming quarters", it said, despite a challenging external environment and persistent uncertainty.