Doha: Qatar National Bank (QNB) forecast economic growth in the euro area to continue at up to 1.5 percent, a rate higher than the consensus forecast, supported by improved consumption conditions, a recovery in the manufacturing sector, and increased fiscal spending. According to Qatar News Agency, QNB's weekly report highlighted that the euro area economy has been under exceptional pressure due to a combination of negative factors, including unprecedented monetary tightening, the energy crisis, weak external demand, and elevated levels of global uncertainty. The report indicated that these challenges have impacted the region's economic performance, with average growth not exceeding 0.8 percent from 2023 to 2025, significantly lower than the US economy's average annual growth of 2.6 percent over the same period. QNB attributes the expected improvement in growth to three main factors, starting with a recovery in consumer spending, fueled by improved household financial conditions and growth in real income. The euro area has managed to control inflation, stabilizing near the European Central Bank's 2 percent target over the past year. This stabilization in inflation allowed for a more accommodative monetary policy, with the benchmark interest rate reduced by 200 basis points from a peak of 4 percent in mid-2024 to 2 percent by June 2025. This policy shift has ceased to hinder consumption and has instead contributed to expanding real credit to the private sector. Simultaneously, labor markets have remained strong, with the unemployment rate nearing historical lows at 6.3 percent. QNB anticipates real household income to grow by around 1.5 percent in 2026, which is expected to lead to similar growth in consumption, accounting for more than half of the euro area's GDP. The second growth factor is linked to expansionary fiscal policy, notably in Germany, along with increased defense spending across the euro area. The bank projects significant fiscal expansion in Germany in 2026, driven by increased social support and defense spending, with the fiscal deficit reaching about 3.7 percent of GDP. This expansion could potentially add around 0.5 percentage points to German economic growth, as Germany accounts for nearly 30 percent of the euro area economy. Additionally, increased defense spending in many euro area countries due to the Russia-Ukraine war could contribute between 0.2 and 0.4 percentage points to real GDP growth in 2026, indicating that fiscal policy will support growth, unlike in 2025. The third growth factor is related to the manufacturing sector, which is showing signs of stabilization after a prolonged downturn. The sector faced challenges in 2023 and 2024 due to monetary tightening, high energy costs, weak external demand, and inventory level corrections, resulting in an annual contraction of about 6 percent. As inventory correction effects diminish, energy costs normalize, and global trade tensions ease, the manufacturing sector is beginning to post positive growth rates. The report concludes that, de spite structural challenges, the improvement in manufacturing, which constitutes 15 to 20 percent of the euro area economy, is expected to provide additional growth support during 2026.