Brussels: The recession in the 17-nation eurozone deepened sharply in the fourth quarter of 2012 as the debt crisis continued to sap growth and confidence, with the outlook remaining uncertain and weak, analysts said Thursday.
Eurostat data showed the eurozone contracted 0.6 percent in the final quarter last year, worse than analyst expectations, with the major economies also now dragged down, including Germany, the bloc’s powerhouse.
The European Central Bank meanwhile reported Thursday that its survey of professional forecasters showed them cutting their growth estimate for this year to zero from 0.3 percent.
For 2014, the forecasters were barely more optimistic, with growth put at 1.1 percent from 1.3 percent.
The ECB said the revisions largely reflected the poor fourth quarter as the eurozone economy shrank 0.6 percent compared with the three months to September when it dropped 0.1 percent. That outcome extended the recession to three quarters after a contraction of 0.2 percent in second quarter 2012.
Data so far for 2013 suggested the situation was stabilising, analysts said, but the outlook remained weak and was hostage to key risks, such as political uncertainty in Italy and Germany ahead of elections.
Compared with output in the fourth quarter of 2011, the eurozone economy contracted 0.9 percent, according Eurostat agency figures.
For the wider 27-member European Union, output fell 0.5 percent compared with third quarter 2012 when the bloc had eked out growth of just 0.1 percent to narrowly avoid being in recession, as defined as two consecutive quarterly negative figures.
Compared with fourth quarter 2011, the EU economy shrank 0.6 percent.
Eurostat said that for 2012 as a whole, the eurozone economy contracted 0.5 percent and the EU 0.3 percent.
Analysts said the figures painted a bleak picture, especially the situation in Germany, which shrank 0.6 percent in the fourth quarter, although some suggested the country might be able to bounce back quickly if exports get a boost.
“Overall, the German economy suffered a setback in late 2012… but all the signals coming from leading indicators since November point to a rapid rebound in early 2013,” said Timo Klein at IHS Global Insight.
Among the other larger economies, France was down 0.3 percent in the fourth quarter, Italy slumped 0.9 percent, Spain shrank 0.7 percent and non-euro Britain was down 0.3 percent as the Olympics’ boost faded.
ING Bank analyst Peter Vanden Houte said he had expected a eurozone downturn of 0.4 percent instead of the 0.6 percent reported, noting that not only had the “usual suspects” Spain and Italy shown negative figures, but also Germany, France and the Netherlands.
“The outlook for 2013 remains subdued. While a gradual improvement of the world economy is likely to support European exports, domestic demand is bound to remain very weak as fiscal tightening and rising unemployment will take their toll,” he said.
Additionally, “a lot of things still can go wrong. The economic and political outlook in Spain and Italy remains uncertain, while the difficult bailout of Cyprus could stoke contagion fears,” he said.
Howard Archer of IHS Global Insight said the fourth quarter fall “brought a dismal end to a very difficult year for the eurozone.
“However, the signs are that eurozone economic activity bottomed out around last October and it is very possible (the economy) could stop contracting in the first quarter,” Archer said.
The hope “is that a sustained overall easing of sovereign debt tensions and generally improved financial markets further reduces uncertainties and steadily lifts consumer as well as business confidence.”