ECB Monthly Report: Continuing downside risks to the economic outlook for the euro area

Share | (Barcelona) - In the December ECB Monthly Report the Governing Council warned of downside risks to eurozone growth, connected mainly with "uncertainties about the resolution of sovereign debt and governance issues in the euro area, geopolitical issues and fiscal policy decisions in the United States."

According to the report, Eurozone GDP growth in the third quarter of 2012 declined by 0.1% and we will most probably see further weakness in the last quarter of the year. Nevertheless, a gradual recovery should begin in 2013 "as the ECB's accommodative monetary policy stance and significant improvement in financial market confidence work their way through to private domestic expenditure, and a strengthening of foreign demand should support export growth."

The annual GDP growth ranges for 2012 and 2013 have been revised downwards: to between -0.6% and -0.4%, and to between -0.9% and 0.3%, respectively. In 2014 the Eurozone economy should grow between 0.2% and 2.2%

The Governing Council pointed out that recently HICP inflation rates declined as expected and it projects that they should fall further below 2% in 2013. It assured that "inflation expectations for the euro area continue to be firmly anchored in line with the Governing Council's aim of maintaining inflation rates below, but close to, 2% over the medium term."

Finally, the report stresses the importance of the creation of a framework for the Economic and Monetary Union in the euro area, which will be discussed at the European Council meeting on 13 and 14 December.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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