The Irish central bank said any economic recovery in the 17-nation euro area will be led by Germany.
While the German economy, Europe’s largest, probably contracted in the fourth quarter, “indicators suggest a leveling out in the first half of this year,” the Dublin-based central bank said in its quarterly bulletin published today. “Thereafter, expectations are tending towards a moderate upturn for the second half of the year.”
Gross domestic product in the euro area, which fell into recession in the third quarter, probably “declined further” in the final three months of 2012 “and perhaps also into the early part of 2013 as weak domestic demand continues to outweigh positive external demand effects,” the Irish central bank said. “Any upturn in 2013 is likely to be led by Germany.”
Confidence among euro-area consumers and entrepreneurs will remain weak, with the outlook for private sector consumption and business investment negative, the central bank said. Fiscal consolidation will also weigh on the economy while exports will be supported by demand from outside the currency region, it said. Euro-area inflation is expected to remain “on a gradual downward trend into 2013,” according to the central bank.