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Friday, 18 January, 2002, 15:10 GMT
EU predicts eurozone rebound
Euro cash
The introduction of euro cash could spark an economic boost, EC officials have said
The eurozone economy may have shrunk during the last three months of 2001, but it is due for a rapid rebound, the European Commission has calculated.

Growth in gross domestic product (GDP) across the 12-member eurozone over the October to December period is likely to have fallen within the range of minus 0.3% to plus 0.1%, the commission's new economic forecasting model has estimated.

A performance within this range would mean that the eurozone has continued to avoid an out-and-out recession, despite a weak performance from Germany, the area's biggest member.

In the first three months of this year, the commission's model predicts growth of 0.1-0.4%, not far off the region's quarterly average of around 0.5%.

The commission has devised its forecasting model is an attempt to improve the European Union's understanding of its economy, and to help ensure a more nimble response to events.

Previously, the commission had to wait until all member states had calculated their own output data before it was able to work out EU-wide figures.

Beyond the trough

The commission said its new forecasts, the first in what is intended to be a monthly series, gave room for moderate optimism.

"The trough of the recent slowdown is situated in the last quarter of 2001," the commission said.

"But... activity will only moderately accelerate at beginning of this year."

The commission did not comment on the effects of the introduction of euro cash on the region's economy, but officials have previously predicted that it will provide a minor boost to economic activity.

Overall, a lively performance by Irish and Greek economies was forecast partially to offset the slowdown in Germany.

A report on Thursday showed that the German economy had grown by just 0.6% in 2001, a figure implying that it shrank during the third and fourth quarters of the year.

Faster figures

The commission's forecasting model takes a somewhat unusual approach to measuring economic activity.

Since it aims to pre-date official GDP figures, it relies on consumption-based indicators, such as car sales and construction industry confidence.

Recognising that such an approach carries a measure of uncertainty, it intends to forecast GDP growth in a range, rather than fixing on a particular figure.

The commission's forecasters say that tests indicate their model should be accurate up to 76% of the time.

See also:

17 Jan 02 | Business
Germany on brink of recession
22 Nov 01 | Business
Rich countries on the brink
22 Nov 01 | Business
UK economic growth trimmed
08 Nov 01 | Business
ECB takes bold action
16 Oct 01 | Business
Jobs woe for German economy
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