The eurozone should exit a mild recession in the second half of this year, but the chances are still considerable that it will suffer a more severe contraction, Standard & Poor's rating agency said Thursday. "We think the scale continues to tilt in favour of a mild recession and a slow return to growth, although the risks of a gloomier outcome have not diminished yet," Jean-Michel Six, S&P's chief economist for the region, was quoted as saying in a statement.
The rating agency's baseline forecast for 2012-2013 is for zero GDP growth for the eurozone as a whole in 2012 and 1.0% growth in 2013. "We currently assign a 60 percent probability to our baseline forecast, versus 40 percent for our alternative forecast of a true double dip" recession, added the statement. It said three factors would likely determine the depth of the eurozone's current downturn, including how demand from emerging markets holds up as well from European consumers.
How European governments and especially the European Central Bank rekindle investor confidence in capital markets in the next few quarters would also be important, S&P added. The International Monetary Fund in its latest forecasts issued last week also predicted that the eurozone would only suffer a short and mild recession but end the year with no growth.
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