FRANKFURT (AFP) - Eurozone experts are growing increasingly cautious about the outlook for growth in the single currency area in the face of the anticipated slowdown of the global economy, a new poll conducted by the European Central Bank showed.
The eurozone's growth outlook was further clouded by separate data which showed that recovery in the region's biggest economy, Germany, has more or less come to a standstill.
The ECB's regular quarterly "Survey of Professional Forecasters", the results of which were published in the bank's November monthly bulletin, showed that the experts had revised downward their forecasts for growth in both 2005 and 2006.
The experts are now pencilling in growth of around 2.0 percent in 2005, down from 2.1 percent previously.
And the 12-state economy was expected to grow by 2.2 percent in 2006, instead of 2.3 percent as previously anticipated, the forecasters predicted.
The downward revision was largely connected with the anticipation of a slowdown in worldwide growth, the ECB explained.
"With gross domestic product (GDP) growth seen as being driven mainly by external demand, a deceleration in world economic expansion is thought to be a major downward risk for the years ahead and explains a large part of the downward revision to the growth outlook," the ECB wrote.
"On the domestic side, favourable financing conditions are expected to support an upswing in investment. However, survey participants consider that low levels of confidence and weak demand due to a lack of improvement in the labour market are clouding the prospects for growth," the report said.
Germany, the eurozone's biggest economy, is already seeing its short-lived recovery run out of steam, separate data published by the federal statistics office, Destatis, showed on Thursday.
German gross domestic product (GDP) shuddered to a near-halt in the period from July to September, growing by a meagre 0.1 percent, Destatis calculated.
Growth was therefore not only much slower than 0.4 percent recorded in both of the preceding two quarters, but it was also slower than analysts' expectations for third-quarter GDP growth of around 0.3 percent.
In fact, it was the slowest rate of growth of the German economy since the second quarter of 2003, the final quarter of the last recession.
Destatis blamed the sharp slowdown on falling exports, previously the main engine of German economic growth, in the face of the strong euro, high oil prices and the global slowdown.
With the German recovery effectively cut short, the ECB is likely hold off any upward moves in interest rates until after next year, economists said.
The ECB has held its central "refi" refinancing rate steady at 2.0 percent since June 2003.
Nevertheless, in its November monthly bulletin, the ECB appeared to be leaning more towards a rate hike than a reduction in eurozone borrowing costs in face of runaway oil prices.
The surging price of oil is more likely to fuel inflation than put the brakes on economic growth, the guardian of the euro estimated, warning that it would not hesitate to tighten monetary conditions to prevent an inflationary spiral.
"The full impact of oil price changes on prices and economic activity largely depends on the actual reaction of wages as well as fiscal and monetary policy," it said.
But overall, the mission of a central bank in such a context was to ensure that "the temporary and unavoidable direct effects of oil price increases on inflation do not fuel inflationary expectations and lead to the emergence of second-round effects" in terms of wages.
Indeed, "if there are indications that general inflationary pressures are increasing, central banks need to be ready to take action" and raise rates, the ECB said.
Nevertheless, the experts polled by the ECB in its quarterly survey appeared confident that area-wide inflation could be contained.
They forecast eurozone inflation would average 2.1 percent this year and then slow slightly to 1.9 percent in both 2005 and 2006.
The ECB defines price stability as inflation rates close to but just below 2.0 percent.
Higher oil prices would be "counterbalanced" by the rise in the value of the euro, the experts said.
11/11/2004 - 14:26 GMT - AFP