LIVE MARKETS-Goldman see eurozone riding Germany's stimulus express

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GOLDMAN SEE EUROZONE RIDING GERMANY'S STIMULUS EXPRESS

Goldman Sachs expect a modest improvement in the euro area economy in 2026, driven by Germany's fiscal stimulus, fading global trade tensions, and resilient consumer spending.

They forecast euro area growth of 1.3%, saying in a Monday note: "We expect 2026 to be a better year for the Euro area economy than 2025, given prospects for cyclical improvement."

"That said, we only look for a small growth improvement as Europe faces several structural headwinds at home and abroad," they add, pointing to competition from China, high energy costs, underinvestment in high-tech sectors, and demographic shifts.

But Germany's fiscal expansion is set to provide a significant boost, offsetting contractionary policies elsewhere and resulting in a neutral area-wide fiscal impulse, Goldman said.

The brokerage expects the German deficit to rise to 3.7% of GDP in 2026, delivering a fiscal boost to German growth of half a percentage point. Meanwhile, the negative impact of global trade tensions is forecast to diminish, while robust consumer spending should be supported by income growth outpacing inflation.

(Akriti Shah)

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