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Thursday, August 9, 2012

European Central Bank cuts growth forecasts for 2012 and 2013

LONDON (SHARECAST) - The European Central Bank (ECB) gave a gloomy outlook for the Eurozone economy on Thursday in its monthly report, dampening sentiment on equity markets as it downgraded its growth prospects for this year and the next.

The Governing Council also said that it may undertake "outright open market operations", suggesting that the Bank would follow through on last week's hint by President Mario Draghi at further bond-buying.

The ECB now expects the region to contract by 0.3% this year, slightly worse than the 0.2% fall originally estimated, while 2013 growth will be 0.6%, under the previous forecast of 1%.

"Looking beyond the short term, the Governing Council expects the euro area economy to recover only very gradually, with growth momentum being further dampened by a number of factors," the ECB said.

"In particular, tensions in some euro area sovereign debt markets and their impact on financing conditions, the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment are expected to weigh on the underlying growth momentum, which is also affected by the ongoing global slowdown." Read More