— By Eric Culp — 

Economic activity in the EU and UK is set to cool next year even with expectations of higher GDP growth in the region’s largest economy, according to the latest projections from the OECD.

But as the year was winding down and just days after the group had unveiled its latest projection, media reports suggested the US could pull out of its trade agreement with Canada and Mexico, casting yet another of many shadows over the global economy.

First, good news of sorts: at least Europe is not headed for recession. The OECD said it expected Eurozone GDP to improve 1.2% next year – a forecast 0.2 percentage points higher than its September estimate. However, this would be a slight decline from the 1.3% projected for 2025.

A 1.2% growth rate next year was also the expectation of the European Commission, Dutch bank ING, and Shaan Raithatha, an economist at US fund manager Vanguard, who noted, “The euro area has experienced a soft landing.”

A stronger contribution from Germany should support this outlook, with the OECD prognosticating growth in Europe’s largest economy to improve to 1.0% in 2026 from a paltry 0.3% estimated for this year. Numerous economists have highlighted Berlin’s plans to spend up to a trillion euros or more on infrastructure and the military over the coming years, outlays likely to help the German economy and a number of others throughout Europe.

Additionally, economic data from the late third and early fourth quarter of 2025 has offered grounds for further optimism about Germany, according to ING economist Carsten Brzeski. He said there were “at least tentative signs of a bottoming out” in manufacturing after the German national statistics office Destatis announced that measured on a monthly basis, industrial production in the country rose 1.1% in September and 1.8% in October. “It’s the first time since early 2024 that German industrial production increased for two consecutive months – an almost forgotten phenomenon,” Brzeski wrote.

German carmakers were somewhat upbeat about the coming year, with the national industry association VDA (Berlin; www.vda.de) predicting a 2% rise in new domestic registrations. Nearly one-third of the expected 2.9 mn in unit sales were to come from electric vehicles, a 17% increase, the organisation said. But it warned that the forecast would still leave registrations as a whole some 20% below the mark set in 2019 before the pandemic. “Europe (EU, EFTA, UK) is projected to grow by 2% to 13.4mn vehicles,” the trade group said.

The French economy is expected to expand at least 0.9% next year, according to Banque de France, the country’s central bank, with the finance ministry in Paris forecasting minimum improvement of 0.8%. Both were below the OECD forecast of 1.0%, which was raised a tenth of a point from September’s estimate, with expectations set at 0.8% for this year. Uncertainty in domestic politics and international trade have been undercutting the economy, according to observers.

The OECD forecasts say next year’s growth leader among the EU’s four largest economies is also the smallest. The outlook for Spain has improved substantially since September, with the OECD raising its GDP growth expectations to 2.2% from its 2.0% prediction just three months ago. On the downside, this would be a significant slowdown, with Spanish growth for this year estimated at 2.9%.

Italy looks to be at the back of the line among the Big Four. Growth was set to improve to 0.6% next year, a tenth higher than estimates from September and for 2025, according to the OECD. Rome was more optimistic, with the country’s national statistics office Istat announcing in early December that it expected a 0.8% improvement, which confirmed its June outlook.

Notable GDP growth performances in the Eurozone are expected from Ireland (4.9%), Lithuania (3.1%), Estonia (2.9%), Croatia (2.7%), Slovenia (2.3%), and Greece and Portugal (2.2%), according to the OECD report.

For the British economy, it appears that Brexit is the gift that keeps on giving London and business leaders fits. Economic expansion is expected to decelerate to 1.2% next year – up two-tenths from the OECD’s September forecast – from a projected 1.4% this year, the group’s report said.

KPMG was less optimistic: “The UK economy is expected to slow to 1.0% in 2026, down from 1.4% in 2025, as a combination of a softening labour market and subdued consumer confidence constrain household spending.”

Other regions offer sunnier prospects. “Central and Eastern Europe should return to ‘normal’ in 2026,” ING wrote. “Poland and the Czech Republic are set to confirm this year’s recovery, with household consumption driving growth while industry should remain muted. Hungary and Romania should also rebound after stagnation, though weaker German growth and limited fiscal stimulus remain key risks.”

The OECD estimated Polish growth in 2026 at 3.4% after 3.3% this year. Czech GDP expansion was set to slow to 2% after 2.4% this year, the group said, noting that private spending was supporting the economies of both countries.

Households were also expected to boost the Hungarian economy, the report added, with growth set to surge to 1.9% after only 0.3% this year. Fiscal consolidation is likely to reduce Romanian GDP to 1.0% in 2026 from 1.3% this year, the OECD concluded.

Year-Enders 2025: With the year on its way out, Plasteurope.com is taking stock of the European plastics industry and related sectors. From the impact of US tariffs and the state of the European economy to polymer price trends and the recycling, energy, and gas markets, we’re bringing you an analysis of the year that was, with hints of what you can expect in 2026. Our goal, simple as always, is to help you make better business decisions with a clearer understanding of the trends, challenges, and transformations in the industry, with insights from expert voices in each sector concerned.