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Eurozone 'to experience mild recession this year'

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Eurozone 'to experience mild recession this year'

Gross domestic product in the eurozone is likely to decline over the next few months, a new forecast has indicated.

According to Legal & General Investment Management (LGIM), the financial bloc looks set to experience a "mild recession" during 2012.

Estimates suggest that while the eurozone economy will not contract next year, growth is likely to be limited and little more than zero.

LGIM said this forecast depends on Greece remaining in the single European currency, as the country's exit would have "large negative impact on growth across the region".

Hetal Mehta, economist at LGIM, commented: "The euro area debt crisis is undoubtedly a major concern.

"Fortunately, global economic conditions are much better than during the perfect storm that started in 2008."

Indeed, he noted that the financial environment four years ago was characterised by factors such as "collapsing" world trade and high and rising interest rates.

"Those conditions just don't exist today," Mr Mehta observed.

He went on to stress that while many commentators believe Spain will soon go down the same road as Greece, he does not believe this will occur.

Mr Mehta said this is because the private sector in the country is not borrowing anymore, while exports look likely to "exceed imports and external interest payments" by 2013.

This, he stated, means Spain can become a self-financing nation, a state of affairs that looks a distant prospect in Greece at the moment.

The economist believes that if Greece remains in the eurozone, the financial bloc will experience "sluggish growth and painful economic adjustment".

Mr Mehta added that government debt levels will go up in virtually every single member of the single European currency in the next few months.

Nevertheless, Germany's economy is expected to perform better than those of its peers, while France could experience weak increases in gross domestic product as well.

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