The Eurozone economy is likely to see further contraction in the first quarter of 2012 after contracting 0.3 percent in the final three months of last year and slip into recession, IHS Global Insight Chief Economist Howard Archer said.
Archer pointed out that a breakdown of the revised GDP data released by Eurostat on Tuesday makes worrying reading as it shows widespread weakness.
He said that overall contraction was limited by 0.2 percent quarter-on-quarter growth in France, which was somewhat at odds with the general tone of the fourth-quarter data and surveys.
The euro area economy is expected to shrink 0.5 percent this year, held back significantly by extended contraction in Italy and Spain, the economist said.
Eurozone may start growing gradually again during the second half of 2012, assuming a sustained easing in sovereign debt tensions, reduced inflation boosting consumer spending power, and a pick-up in global growth.
The European Central Bank is expected to remain in "wait and see mode" for some time and will eventually trim interest rate to 0.75 percent from 1 percent, Archer said.
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