IMF cuts forecasts for the eurozone in IMF/OECD News 14/06/2026 The euro area economy confronts new headwinds from the war in the Middle East and the resulting energy price increase. Against a more fragmented global backdrop, these challenges are layered on top of Europe’s long‑standing structural headwinds—population aging and persistently subdued productivity growth. The near-term goals for macroeconomic policies are to keep inflation expectations at target and cushion the hit to activity in a fiscally prudent manner. At the same time, moving ahead on the structural agenda to strengthen Europe’s energy security, economic resilience, and potential growth has become even more urgent. Following a period of growth at potential and inflation on target, the euro area outlook has weakened. The war in the Middle East is expected to represent a large but temporary adverse supply shock that weakens confidence and tightens financial conditions, with temporary impacts on inflation. Staff’s latest projections, updated since the April World Economic Outlook to reflect more persistent disruptions to energy supply, point to growth of 0.9 percent in 2026 and 1.2 percent in 2027, below pre-war estimates by 0.5 and 0.2 percentage point, while headline inflation is projected to rise to 2.8 and 2.3 percent, above pre-war estimates by 0.8 and 0.4 percentage point, respectively. Risks are skewed toward weaker growth and higher inflation. An even more persistent energy shock could raise inflation and inflation expectations further, even as a drop in confidence or financial stress could weaken demand. A resurgence of the conflict in the Middle East or delays in repairing energy infrastructure, intensified hostilities in Ukraine, and further trade policy adjustments pose additional downside risks. Financial stability risks have risen with the weaker outlook and could increase further if a sharp global risk-off episode were to amplify negative wealth effects, or if balance sheet stress in l