The European Outlook 2026-2027: Domestic strength to be tested by energy prices
Explore the outlook for the European economy in 2027, including investment trends, political shifts, and potential challenges ahead.
The European economy is forecast to grow by 1.4% in 2027, marking an acceleration from this year and reflecting increased German investment, stronger intra-European exports, and improving consumer spending. However, challenges remain, particularly from rising energy prices and geopolitical tensions.
Despite recent resilience against external shocks, the Eurozone faces limited fiscal and monetary policy support, leaving it vulnerable to future disruptions. The sharp rise in natural gas prices poses a significant near-term threat, though Europe’s reduced reliance on gas mitigates the risk of severe shortages.
Political dynamics in 2027 will be pivotal, with elections in major economies likely leading to a shift towards right-leaning policies. This could impact areas such as climate policy, migration, and defence, potentially increasing fiscal pressures and creating volatility in bond markets.
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