The European Commission on Friday lowered the economic outlook for euro area this year as well as the next, saying that domestic investment and consumption are still being held back by balance-sheet adjustment and credit supply constraints in some countries.
In its latest Spring 2013 Forecast, the Commission said that the euro area will contract 0.4 percent in 2013, steeper than a 0.3 percent shrinkage predicted in February.
The 17-nation economy is expected to start recovering in 2014 with the gross domestic product increasing at a rate of 1.2 percent. This was, however, weaker than a 1.4 percent growth projected in the Winter Forecast.
The EU slashed the growth outlook for Germany this year to 0.4 percent from the previously estimated 0.5 percent. The forecast for 2014 was also cut, to 1.8 percent from 2 percent.
The French economy is seen contracting 0.1 percent this year, in contrast to the earlier prediction of 0.1 percent expansion. In 2014, the economy is forecast to grow 1.1 percent, weaker than the February prediction of 1.2 percent growth.
In Italy, recession is expected to be steeper than predicted in 2013. The EU forecast Italian GDP to shrink 1.3 percent this year, before growing 0.7 percent next year. These forecasts were weaker than February projection of 1 percent contraction and 0.8 percent growth for 2013 and 2014 respectively.
The Spanish economy is now forecast to contract 1.5 percent this year, steeper than 1.4 percent contraction seen earlier. However, the GDP outlook for 2014 was raised slightly to 0.9 percent growth from 0.8 percent predicted in February.
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