IMF Warns: Eurozone May Face Sustained Low Growth in Medium Term

[IMF Warning: Eurozone May See Sustained Low Growth in Medium Term]

(1) The International Monetary Fund released its European Regional Economic Outlook report, upgrading the eurozone's 2026 GDP growth forecast to 1.0%. The report stated that the eurozone has successfully weathered geopolitical shocks, but its potential economic growth remains weak, and it will enter a phase of subdued growth in the medium to long term.

(2) Economic performance within the eurozone shows clear divergence. Spain's 2026 GDP growth forecast was raised to 2.4%, significantly higher than core economies such as Germany, France, and Italy, with Germany at 1.2%, France at 0.3%, and Italy at 0.7%.

(3) The report noted that the eurozone is weighed down by slow productivity gains, insufficient single-market efficiency, and sluggish structural reforms, with the region's potential economic growth at just 1.0%. External disruptions could amplify downside pressures on growth, with energy and supply chain volatility likely to drag down growth expectations.

(4) Inflation has rebounded due to Middle East conflicts and extreme summer weather. The IMF raised its 2026 eurozone inflation forecast to 3.0%, with 2027 inflation raised to 2.7%, and expects inflation to approach the European Central Bank's target level only by 2028. Core inflation trends remain relatively stable.

(5) Europe's growth shortfalls stem from inadequate digitalization and AI technology adoption, hindered corporate scaling, fragmented capital markets, coupled with high energy costs and an aging population. Over the coming decades, spending on pensions, defense, and green transition will continue to rise, squeezing fiscal space for strategic investment in various countries.