The OECD has said that it expects the euro area economy to grow by 1.0% in both 2026 and 2027, with demand strengthening once ‘energy prices normalise and new defence initiatives gain pace’.
The projections form part of the OECD’s September 2026 Interim Economic Outlook, which forecasts global GDP growth of 2.9% in 2026 and 3.0% in 2027, meaning the euro area economy is set to lag global growth.
The forecast for the euro area represents an improvement compared with the OECD’s June outlook, when growth was projected at 0.8% in 2026 and 1.2% in 2027.
‘The recent rise in energy prices and higher policy rates are expected to weigh on activity, though the impacts will fade as energy prices ease and new defence spending initiatives gain pace,’ the OECD noted.
Inflation rates
Elsewhere, the OECD projects euro-area headline inflation at 3.0% in 2026, easing to 2.9% in 2027.
Across the G20, headline inflation is forecast to rise from 3.4% in 2025 to 4.1% in 2026 before falling to 3.6% in 2027.
In advanced G20 economies, inflation is projected to increase from 2.5% in 2025 to 3.2% in 2026 and then fall to 2.6% in 2027. Core inflation in advanced G20 economies is expected to ease from 2.7% in 2026 to 2.5% in 2027.
Energy shock
The OECD said global growth in the first half of 2026 remained resilient despite the energy shock caused by the Middle East conflict. Oil inventories, additional production outside Gulf economies, alternative supply routes and strategic-reserve releases have helped cushion the initial impact, but reserves are dwindling.
‘The risks of supply disruptions could also be exacerbated by the current relatively low level of European gas reserves and the uncertain scope for sustained further reductions in oil inventories in some countries,’ it noted. ‘Stocks of some fuel products have declined sharply in certain regions, including diesel in Europe.’
The organisation said that it also expects strong AI-related activity to continue supporting investment, production and trade.
However, trade policy remains a risk for the global economy, with the OECD estimating that new US bilateral tariff rates introduced from July have increased the average US effective tariff rate by around one percentage point. Read more here.
