Eurozone economy to shrink 0.3-per cent in 2013

Economic downturn in the eurozone will continue for one more year in the wake of continuing debt crisis in the region, lack of credit growth and rising unemployment, European Union said yesterday.

In its winter forecast 2012-2014, the European Commission (EC) has reversed its growth projection for the 17-nation eurozone to a 0.3-per cent contraction in gross domestic product (GDP) from its November estimate of 0.1-per cent expansion. The economy shrank 0.6 per cent in 2012.

However, the commission was optimistic about a 1.4-per cent GDP growth in 2014 counting on acceleration of economic activity propelled by recovery in exports and improvements in domestic investment and consumption.

EC's vice-president for economic and monetary affairs Olli Rehn said, "The current situation can be summarised like this: we have disappointing hard data from the end of last year, some more encouraging soft data in the recent past, and growing investor confidence in the future."

"The decisive policy action undertaken recently is paving the way for a return to recovery," he further stated.

Germany, the bloc's largest economy and the world's fourth-largest, is expected to grow 0.5 per cent in 2013 down from the earlier estimate of 0.8 per cent,