The conflict in the Middle East was bound to affect the European economy. Economists had predicted this. However, reality turned out to be even worse. GDP fell over the quarter, and annual growth significantly slowed down.
Gross Domestic Product, the key measure of economic development, for the entire European Union experienced a 0.1% drop when comparing the first quarter of 2026 with the fourth quarter of 2025. Year-on-year, there is an increase in the indicator, but significantly lower than previous reports indicated. GDP grew by 0.7% annually (half as fast compared to the analogous report from three months prior).
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The eurozone recorded a larger quarterly decline and a stronger slowdown in annual growth. For countries using the common currency, GDP dynamics were -0.2% and 0.3% respectively. These are results significantly worse than economists’ forecasts, who expected a quarterly growth of 0.1% and 0.8% annually.
Polish GDP in relation to Europe. Very good annual result
How does Poland compare to other European countries? From a quarterly dynamics perspective, our economy is closer to the best-performing countries than the worst, but it doesn’t stand out from the crowd. GDP grew by 0.6%. Latvia and Spain achieved the same result. For example, Malta, Estonia, and Denmark grew faster. The latter country has the best quarterly result — there, growth reached 1.9%.
Ireland’s economy contracted the most quarter-on-quarter (by 12.1%). The sharp fluctuations and declines in Irish GDP are primarily due to the presence of global technology and pharmaceutical corporations that have their headquarters there. This causes traditional GDP to not reflect the actual state of the local economy, and massive international transfers artificially inflate or deflate the statistics.
France, Sweden, and Lithuania also recorded negative GDP dynamics, but their declines did not exceed 0.3%.
Comparing the first quarter of 2026 with the first quarter of 2025, Ireland also fares the worst (-16.8%). Romania is also below zero (-1.1%). Poland can boast a growth of 3.5%. This is one of the better results. Only two countries developed faster: Denmark (5.9%) and Malta (4.3%).
For comparison, in the Czech Republic, annual growth was 2.2%, and in Germany, it was only 0.3%. Europe’s second-largest economy, France, recorded GDP growth of 0.9%.
GDP in Europe. What constitutes the indicator?
Eurostat indicates the contribution of key components of the indicator to GDP in Europe. Quarterly household consumption expenditure, as well as government expenditure separately, were positive in both the eurozone and the EU (each by +0.1 percentage points).
Gross fixed capital formation was negative in both the eurozone and the EU (each by -0.1 percentage points). The same applied to changes in inventories.
Exports minus imports, on the other hand, were negative in both the eurozone (-0.3 percentage points) and the EU (-0.2 percentage points).
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