IMF Cuts Growth Outlook for France and Germany While Italy Holds Steady
The International Monetary Fund has maintained its growth forecast for Italy but lowered expectations for France and Germany, highlighting the uneven pace of Europe's economic recovery as higher energy prices and geopolitical uncertainty continue to weigh on the eurozone.
Europe's largest economies are entering the second half of 2026 with increasingly divergent growth prospects.
In its latest World Economic Outlook, the International Monetary Fund (IMF) kept its projections for Italy unchanged while revising downward its forecasts for both France and Germany, underscoring the growing challenges facing the eurozone amid persistent inflationary pressures, elevated energy costs and global geopolitical tensions.
According to the IMF, Italy's economy is expected to expand by 0.5% in both 2026 and 2027, with public investment under the country's National Recovery and Resilience Plan continuing to support economic activity despite weak domestic demand. However, higher food and energy prices are expected to keep inflation above the European Central Bank's target for several years.
The outlook is less favorable for two of the eurozone's largest economies.
The IMF reduced its 2026 growth forecast for France to 0.6%, three-tenths of a percentage point below its previous estimate, reflecting weaker domestic momentum and growing external uncertainty. Germany, Europe's largest economy, is now expected to grow by 0.7% in 2026, as industrial production continues to face pressure from soft global demand, higher energy costs and structural competitiveness challenges.
By contrast, Spain continues to outperform many of its European peers, with the IMF maintaining its forecast of 2.1% growth in 2026 and 1.8% in 2027, supported by stronger domestic demand, tourism and investment.
The Fund warns that the greatest short-term risk for Europe remains geopolitical instability.
Escalating tensions in the Middle East and uncertainty surrounding global energy supplies could place additional pressure on oil, gas and commodity prices, increasing inflation while slowing economic activity across the continent.
The IMF has consequently raised its global inflation forecast to 4.7% for 2026, citing rising energy and commodity prices following recent geopolitical developments. While inflation is expected to ease during 2027, the Fund believes the disinflation process has temporarily stalled.
Against this backdrop, the IMF is calling on governments to maintain prudent fiscal policies while preserving investment in strategic priorities such as energy security, digital transformation and artificial intelligence.
The institution also emphasized the importance of central bank independence and structural reforms aimed at improving productivity and strengthening long-term competitiveness.
For European businesses and investors, the updated outlook reflects an increasingly fragmented economic landscape.
While Southern European economies continue to demonstrate greater resilience, traditional industrial powerhouses such as Germany and France face a more challenging environment shaped by slowing global trade, rising production costs and continued geopolitical uncertainty.
As Europe navigates another period of economic adjustment, the IMF believes that restoring sustainable growth will depend not only on controlling inflation but also on accelerating investment, innovation and the transition toward a more competitive and resilient economy.
