Brussels (Belgium) (AFP) – Eurozone economic growth dropped to near zero in the first three months of 2026 as surging energy costs triggered by the Middle East war pushed inflation sharply up in April, data showed on Thursday. The figures will add to fears of stagflation — high inflation coupled with low economic growth — in the eurozone because of the Middle East conflict unleashed after the US-Israeli strikes on Iran.
The EU’s official statistics agency said the 21-nation single currency area grew by a mere 0.1 percent in the first quarter, down from 0.2 percent in the final months of 2025 and slower than forecast by economists. Eurozone inflation also jumped to three percent in April, from 2.6 percent in March because of a significant leap in energy prices, Eurostat said. The inflation figure is sharply higher than the European Central Bank’s two percent target for the eurozone. The ECB is expected to hold interest rates steady again later on Thursday as policymakers weigh concerns about higher inflation against worries over weakening growth.
Economists warned against linking Thursday’s growth data too much to the war. The GDP figure “mainly reflects a sharp decline in Ireland and some seasonal factors for the eurozone, rather than the impact of the war,” Nicola Nobile of Oxford Economics said. “The 1Q growth figure is not particularly informative, as it was barely affected by the energy and supply shock caused by the war in the Middle East,” Peter Vanden Houte of ING Bank said. Nobile warned that the war’s “negative effects will be more visible” in the second quarter of the year.
More worrying for policymakers is the rapidly increasing inflation, analysts said. Energy price rises rocketed to 10.9 percent in April, up from 5.1 percent in March. That comes after the cost of energy had been falling until March this year, with data showing they fell by 3.1 percent in February. On a slightly more positive note, core inflation — which strips out volatile energy and food prices and is closely watched by analysts — slowed to 2.2 percent in April, slightly down from 2.3 percent last month.
The EU’s biggest economy, Germany, did better than expected with growth of 0.3 percent in the first quarter of 2026. Analysts surveyed by financial data firm FactSet had forecast growth of 0.2 percent. But France’s economy stagnated in the first three months of the year. Prices also rose in the two biggest economies of the EU. Inflation in Germany accelerated to 2.9 percent in April, slightly up from 2.8 percent in March. Meanwhile, in France, inflation surged to 2.5 percent in April from two percent last month.
© 2024 AFP
