Volkswacht Bodensee - IMF cuts eurozone growth forecast to 1.1%, warns of strong euro

In its first update to forecasts since the Mideast war erupted, the IMF said eurozone exporters are also exposed to the euro's strength against the dollar and other currencies, which makes their products more expensive on global markets.

The forecasts assume that the US and Israeli war against Iran "will last for a few more weeks and a recovery will then gradually take hold" and oil exports normalise, the fund said.

The fund, which is holding its annual spring meeting in Washington, now sees eurozone growth at 1.1 percent in 2026, down from 1.4 percent last year and a decline of 0.2 basis points from its January forecast.

Germany, with Europe's largest economy, should see GDP expand 0.8 percent this year instead of 1.1 percent as its power-hungry industrial heavyweights face higher energy costs.

Growth in France is now seen at 0.9 percent, also down 0.3 basis points from January, while Spain, whose economy has been one of the strongest in Europe in recent years thanks to tourism, saw its growth forecast cut to 2.1 percent.

The IMF cut its Italy forecast to 0.5 percent, the same level chalked up last year.

Outside the eurozone, Britain's economy is now expected to expand by 0.8 percent, a sharp reduction from the 1.3 percent growth the IMF forecast at the beginning of the year, in part because of "a slower pace of monetary easing" than in other major economies.

F.Fehr--VB