1. Normalisation rather than a rebound
2. Assumptions regarding the international environment
3. In the first quarter of 2026, growth is proving resilient but is losing momentum
4. The most severe scenario has been ruled out for the time being
5. A scenario of normalisation rather than a rebound
6. Economic and financial forecasts
Despite the signing of a memorandum of understanding that reduces the extreme risk posed by rising energy prices, the inflationary episode is weighing more heavily on the euro area’s growth outlook than on that of its closest competitors.
CitationThe relative strength of its fundamentals and the transitory nature of the inflationary shock enable the euro area economy to avoid a recession.
Factors contributing to a loss of competitiveness are mounting, and weak exports are increasingly eroding growth. However, domestic demand is holding up, supported by improvements in supply (the labour force and productivity) and a more balanced distribution of value added. Although benefiting less from the global investment supercycle, capital accumulation remains a driver of growth. With wages continuing to act as a disinflationary force, the supply shock is unlikely to result in persistent inflation and would allow growth to normalise at a rate slightly below potential.
