The European Central Bank has issued a bleak forecast for the eurozone economy.
The experts there said it is likely to shrink next year, as it has this year.
ECB President Mario Draghi revealed the sharp downgrade in the growth outlook as he announced the bank would not change its main interest rate this month, keeping it at a record low 0.75 percent.
Draghi said: “The economic weakness in the euro area is expected to extend into next year; in particular persistent uncertainty will continue to weigh on economic activity. Later, in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary policy stance, and significantly improved financial market confidence work their way through the economy.”
For this year the bank’s economists have slightly reduced their forecast range with a midpoint of contraction of 0.5 percent.
For next year they predict shrinkage of 0.3 percent.
For 2014 there is a lot of uncertainty, reflected in the ECB’s forecast. It pencilled in growth of between 0.2 and 2.2 percent.
Asked why the ECB had not chosen to cut rates given its gloomier outlook Draghi said there are “conflicting signs” about short-term growth prospects.
He cited recent improvements in business confidence though admitted that was from a low level.
Inflation was forecast at 1.1 to 2.1 percent next year which seems to give the bank plenty of room to cut rates further.