Eurozone economy will lag in 2012 – Fitch

The Eurozone will lag behind other major advanced economies (MAE), Fitch Ratings has forecast.

The Eurozone’s real GDP is expected to contract 0.2% in 2012, and grow by only 1.1% in 2013. Meanwhile the US recovery is expected to gain momentum, with the economy there growing by 2.2% in 2012 and 2.6% in 2013.

The findings come from Fitch Ratings’ latest quarterly Global Economic Outlook (GEO), which expects the total economic growth of major advanced economies (MAE) to remain weak at 1.1% in 2012, followed by modest acceleration to 1.8% in 2013.

The Eurozone economies are expected to diverge, with GDP contracting in Italy by 1.6% and Spain by 1% in 2012 while Germany and France are projected to grow by 0.7% and 0.4% respectively. Gergely Kiss, director in Fitch’s sovereign team said: “Sizeable fiscal austerity measures and the more persistent effect of tighter credit conditions on the broader economy remain key obstacles to growth.”

The agency forecasts global growth at 2.3% for 2012 and 2.9% in 2013, compared with 2.4% and 3.0% previously. For Japan and the UK, Fitch forecasts GDP to increase 1.9% and 0.5% respectively for 2012, while growth in the BRIC countries is expected to remain strong, at 6.3% in 2012 and 6.6% in 2013.

Fitch believes that monetary tightening is highly unlikely in the short term, and that record low interest rates will last at least until the end of 2012.


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