BNP Paribas projects that Eurozone Gross Domestic Product (GDP) growth will increase to 1.6% in 2026 from 1.5% in 2025, driven by German fiscal measures, higher military spending, and increased investment in artificial intelligence (AI) across Europe. The bank expects growth to maintain a stable quarterly rate of 0.5% throughout 2026, supported by ongoing labor market resilience [1].
However, BNP Paribas notes that this positive momentum is threatened by an energy shock linked to developments in the Middle East. As a result, the bank has revised its monetary policy outlook, now anticipating that the European Central Bank (ECB) will implement three consecutive rate hikes in June, July, and September 2026. These hikes would bring the ECB deposit rate to 2.75% [1].
The anticipated monetary tightening is expected to raise uncertainty around the growth outlook, although BNP Paribas does not see it invalidating their baseline scenario at this stage. The combination of fiscal support and investment is seen as a buffer, but the energy shock and subsequent rate hikes introduce notable risks to the economic trajectory [1].
CONCLUSION
BNP Paribas forecasts a modest acceleration in Eurozone growth for 2026, but warns that an energy shock could prompt the ECB to tighten policy with three rate hikes. This scenario increases uncertainty for the region's economic outlook, though the bank maintains its growth projections for now.