Eurozone’s 0.4% growth lifts it out of recession
LONDON: The 16-country eurozone has officially joined the US and Japan out of recession, after figures yesterday showed its economy grew by 0.4 percent in the third quarter from the previous three-month period.
But the rise reported by EU statistics office Eurostat was not as large as the 0.6 percent most economists had predicted, as growth in major economies fell short of forecasts. With a rebound in exports partially offset by weak household spending, Germany’s economy grew by 0.7 percent and France’s by 0.3 percent.
Still, the third-quarter rise in eurozone output was the first in six quarters and brings to an end Europe’s sharpest recession since World War II.
Though the eurozone’s banks were not at the epicentre of the financial crisis that triggered the global economic downturn, the region suffered as demand for its high-value products fell off a cliff.
The recession was particularly savage at the turn of the year. The 1.8 percent quarterly decline recorded in the fourth quarter of last year was followed by a bigger 2.5 percent drop in the first quarter of this year. In the second quarter of this year, output fell 0.2 percent as Germany and France emerged from recession.
The scale of the downturn in the eurozone is clearly visible in the annual comparisons.
Although eurozone output grew on a quarterly basis, it was 4.1 percent below levels a year ago in the third quarter, a modest improvement on the 4.8 percent slide recorded in the previous three months.
Despite the modest improvement, growth is not expected to return to pre-crisis levels for a while yet, meaning the output lost during the recession will take years to be made up.
Institutions like the International Monetary Fund have warned recovery will be anaemic if policymakers don’t do more to sort out problems in the financial sector, and as long as rising unemployment keeps consumer confidence down. In Spain, the jobless rate stands at an astonishing 19.3 percent.
“The region is at least out of recession and still on track to grow by a reasonably solid 1.5 percent odd next year. But there is scant evidence yet of the pick-up in domestic demand needed to sustain a stronger recovery,” says Jonathan Loynes, chief European economist at Capital Economics.
The US also returned to growth in the third quarter, growing by a quarterly rate of 0.9 percent, says Eurostat. Meanwhile, Japan’s recession ended in the second quarter when its economy grew by 0.2 percent.
Although most eurozone countries are out of recession – including Italy, whose economy grew 0.6 percent – some continued to contract. Figures show Spain’s economy shrank 0.3 percent in the third quarter as it continued to reel from the collapse of its property market.
Partly because of the patchy recovery, analysts warned policymakers to be careful about how they start taking back some of the stimulus measures they set up to prevent the recession from turning into a depression.
The European Central Bank slashed its benchmark interest rate to a record-low 1 percent, while eurozone governments increased spending to support their economies. – Sapa-AP