Geopolitical headwinds cloud Europe’s economic outlook

Europe's economic recovery is once again being put at risk by heightened geopolitical tensions and rising energy prices. This is the key finding from BusinessEurope's 2026 Spring Economic Outlook published today, ahead of the European Council meeting.

BusinessEurope expects EU GDP growth to be at 1.2% in 2026, with the euro area growing by 1.0% - both of which are revised down from the previous forecast. At the same time, inflationary pressures have reemerged, with consumer prices once again accelerating as of March 2026. Inflation is expected to average around 2.8% in both the EU and the euro area in 2026. Depending on how rapidly the traffic disruption in the Strait of Hormuz will be eased by the emerging agreement, this figure could still increase.

BusinessEurope Director General Markus J. Beyrer commented:

"Europe's economy is once again being tested by events beyond its borders. With the resurgence of geopolitical tensions and energy price volatility, a majority of our members report a worsening business climate compared to six months ago.

Rising inflation is another sign of the global uncertainty, which is weighing heavily on business confidence. All our survey respondents report concerns about rising prices, with around 40% saying they are very concerned.

This underlines the urgency: More than ever, Europe needs a strong competitiveness agenda. The EU must focus on what it can control: reducing regulatory burdens, deepening the Single Market, and removing barriers to cross-border trade, investment and mobility. The tools to strengthen growth and resilience are there, but European institutions must act with greater speed and determination."

The other key findings from BusinessEurope's Spring Economic Outlook include:

• The deficit is projected to continue growing, reaching 3.5% in the EU and 3.4% in the euro area in 2026;
• Unemployment is expected to remain close to historically low levels (5.9% in the EU and 6.0% in the euro area in 2026);
• Import growth (2.4% in the EU and 2.2% in the euro area) is projected to outpace export growth (1.7% in the EU and 1.6% in the euro area) in 2026, reflecting resilient domestic demand and ongoing competitiveness challenges for European exports;
• Investment growth is expected to remain solid in 2026 (2.8% in the EU and 2.4% in the euro area), and to stay resilient in 2027 (2.1% in the EU and 1.9% in the euro area), likely reflecting increased investment in defence, digital technologies, and infrastructure.

Please read our Spring Economic Outlook and our letter ahead of the European Council meeting.