Forecasters in the euro zone expect the euro zone economy to contract by 1.7% this year but grow by 0.6% in 2010, according to a survey released today by the European Central Bank.
Experts polled in the ECB's Survey of Professional Forecasters revised estimates for this year 'downwards to an unprecedented degree and now expect euro area economic activity to contract by 1.7%.'
The revision of 2 percentage points lower since October 'is by far the largest since the launch of the SPF in 1999,' the bank said in its latest monthly bulletin.
The professional forecasters are experts affiliated with EU-based institutions that the ECB consults when it considers changes to its interest rates that set benchmark borrowing levels for the 16-nation euro zone.
For 2010, the growth estimate was lowered by 0.8 percentage points to 0.6%. By comparison, the most recent forecast by euro zone central bank staff had expected the economy to shrink by 0.5% this year before expanding by 1% in 2010.
'The downturn is now assessed to be widespread and impacting on all parts of the economy,' the ECB noted.
For inflation, the experts' forecast for 2009 and 2010 have also 'been revised markedly downwards since the previous round (in October) and now stand at 0.9% and 1.6% respectively.'
The change for this year was 1.3 percentage points lower, and the new level is also well below average staff forecasts presented by the ECB in December, which had a midpoint of 1.4%.
ECB policymakers aim for medium-term inflation of just below 2%, and the staff forecasts are also expected to also be revised lower in March. Ongoing falls in commodity prices and weaker than expected economic activity were cited as key factors for the revisions.
The bank said however that falling commodity prices should boost household's disposable incomes, and that monetary and fiscal policy measures announced by euro zone governments were expected to boost activity.
Meanwhile, factories and refineries in the recession-hit euro zone cut production at the fastest rate on record last month, and for 2008 as a whole, official EU data show today.
Euro zone industrial output fell 2.6% in December and 12% for 2008 as a whole, both record slumps since records began in 1990, the European Union's Eurostat data agency said.
