Further rising real wages in a robust labour market should make private consumption a stable pillar of growth in the euro area, while sustained low key interest rates and fiscal measures should in turn support investment. The German spending package and the EU’s exclusion of defence spending from fiscal rules are particularly worth mentioning in this context. Erste Group analysts expect German real GDP growth to accelerate significantly in 2026. In contrast, there is a weakening of momentum in Spain and fading one-off effects in Ireland. For the euro area as a whole, real GDP growth is expected to be slightly lower at 1.2%.
In Austria, the Erste Group analysts expect real GDP growth of 1.0% in 2026, driven by the German fiscal measures. These are expected to be reflected in exports and investments.
In CEE, real GDP growth is expected to accelerate further to 2.7% in 2026. 2026 is the last year that Recovery and Resilience Facility (RRF) funds can be used. In Poland, Romania and Slovenia, about half of the RRF grants have not yet been disbursed. Consumer sentiment is also expected to continue its positive trend in the majority of the CEE countries. The projected GDP growth in the region ranges between 1.0% for Romania, which is particularly affected by weaker private demand and budget consolidation, and 3.9% for Poland, which has been the leading country several times.
While Erste Group analysts initially viewed the greatest risk to any growth in 2026 as the continued erratic trade policy of the US administration, the focus has shifted towards the conflict in Iran and the currently difficult-to-predict impact of rising energy prices and the associated second-round effects. Consequently, the increasing competitiveness of Chinese suppliers in the field of high technology and, in principle, the shift of Chinese overcapacity on European markets add to the overall possible risks.
In an initial reaction to the possible effects of persistently higher energy prices, Erste Group expects inflation to reach 2.2% for the euro area in 2026. Lower wage agreements and the phasing out of base effects in energy prices are key steps to limiting the inflation rate in Austria to a forecast value of 2.5%. For CEE, an inflation rate of 3.5% is expected in 2026, with the risk of consistently higher energy prices here as well.