BNP Paribas analysts project Eurozone growth at 1.6% in 2026, with quarterly expansion around 0.5% and inflation below 2%. Stronger activity and fiscal measures in Germany and higher military spending underpin the outlook. Analysts expect stronger European growth versus the United States to support a gradual rise in EUR/GBP, alongside Dollar depreciation against the Euro.

Eurozone growth and policy outlook

"After holding up well in 2025 (1.5%), growth is expected to strengthen in 2026 (+1.6%)."

"It is expected to grow at a stable quarterly rate of 0.5% over the year."

"Inflation is expected to remain below the 2% target in 2026."

"Stronger economic activity will lead to a progressive acceleration in inflation in 2027, albeit a moderate one."

"This would lead the ECB to increase the policy rate in H2 2027, bringing the deposit facility rate to 2.5%."

"We expect the dollar to continue depreciating against the euro. Structural changes in fiscal policy and the expected strengthening of growth in Europe, coupled with the slowdown in the United States, underpin our forecast of a gradual and moderate rise in the EUR/GBP exchange rate by the end of 2026 (1.20 in Q4 2026)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)