Euro zone economic growth forecasts were lowered by Standard and Poor’s ratings agency today as a series of poor economic data have pointed to sharply slowing activity in the region during recent months.
The S&P growth report showed it forecast growth of 1.7 percent in 2011 and 1.5 percent in 2012 in the euro zone, down from estimates in July of 1.9 percent and 1.8 percent respectively.
S&P said in a statement that “We continue to believe that a genuine double dip will be avoided given the still existing avenues for growth, although we recognize that downside risks are significant.” It added that “In particular, we will closely monitor trends in consumer demand over the coming quarters.”
Based on the agency’s findings and forecasts for a deteriorating economic outlook, S&P said it now expected the European Central Bank not to raise interest rates anymore until the end of the first quarter of 2012. Markets have priced out any chance of a rise in ECB rates for the foreseeable future.
However, despite the gloomy outlook, S&P did not see Europe falling back into recession.
On a country to country basis these were the results of the report:
For Germany, Europe’s biggest economy, S&P cut its 2012 forecast to 2.0 percent from 2.5 percent previously, down sharply from the 3.3 percent it expects to see this year.
It lowered its forecasts for France to 1.7 percent in 2011 and 2012, in line with recently downwardly revised French government estimates. Previously, S&P had forecast the euro zone’s second-biggest economy would grow 2.0 percent and 1.9 percent in 2011 and 2012 respectively.
S&P trimmed its 2012 outlook for Spain to 1.0 percent from 1.5 percent previously, still better than the 0.8 percent growth it forecasts for 2011.
Outside the euro zone, S&P trimmed its forecast for Britain, predicting its economy would grow 1.3 percent in 2011 and 1.8 percent in 2012, down from 1.5 percent and 2.0 percent respectively.