On 21 May 2026, European Commissioner for Economy Valdis Dombrovskis presented the European Commission's Spring 2026 Economic Forecast, warning that the conflict in the Middle East has triggered a new energy shock with major implications for growth, inflation, and public finances across the EU. The forecast projects EU GDP growth of 1.1% in 2026 and 1.4% in 2027, down from earlier expectations, while headline inflation in the EU is expected to reach 3.1% this year before easing to 2.4% next year. Dombrovskis highlighted five key messages: the energy shock fuels inflation and shakes sentiment; growth continues but at a slower pace; energy inflation is rising and spilling over; deficits are increasing; and uncertainty is exceptionally high.
The forecast is the first comprehensive EU economic assessment since the outbreak of the Middle East conflict, which has disrupted energy supplies and sent oil prices 65% above pre-conflict levels and gas prices 50% higher. Dombrovskis noted that the EU's coordinated push towards supply diversification and decarbonisation, especially after Russia's invasion of Ukraine, has left the economy better placed to absorb the shock than during the previous energy crisis. However, inflation is still projected to rise sharply, with energy inflation peaking above 11% in the second quarter of 2026 before gradually easing.
On public finances, the average EU deficit is forecast to rise from 3.1% of GDP in 2025 to 3.5% in 2026 and 3.6% in 2027, driven by slower growth, higher interest expenditure, and increased defence spending. Ten member states reported deficits exceeding 3% of GDP in 2025, a number expected to rise to thirteen by 2027. Dombrovskis stressed that fiscal support measures for vulnerable households and businesses must remain temporary and well-targeted, learning from past crises.
The forecast also includes a scenario analysis of a more severe and long-lasting energy supply disruption, under which oil prices would peak at USD 180 per barrel and gas at EUR 80/MWh, inflation would exceed the baseline by 1.1 percentage points in 2027, and growth would be roughly halved. Dombrovskis emphasised that this is not the central projection but reflects the unusually high degree of uncertainty surrounding the conflict's duration.
Stakeholder impacts: EU consumers face weaker purchasing power as inflation erodes real incomes, with precautionary savings likely to restrain consumption growth. EU businesses, particularly in services and manufacturing, face higher energy costs, tighter credit conditions, and reduced investment, though some sectors benefit from resilient market funding costs. EU member states with high deficits, such as Poland, Romania, Hungary, France, and Belgium, face pressure on fiscal sustainability and may need to balance energy relief measures with deficit reduction. Energy-importing economies outside the EU, especially in emerging Asia and the MENA region, see weakened growth prospects, while the US, as a major energy exporter, has a strengthened outlook.