BRUSSELS (dpa-AFX) - The near-stagnation of the Eurozone economy in the third quarter raises concerns about deflation in the region, Jonathan Loynes, Chief European Economist at Capital Economics said in a note.
The economist expects the currency bloc to grow by just 0.5 percent or so next year, well short of the rates needed to head off the growing dangers of deflation and address the region's ongoing debt crisis.
Official data released on November 14 showed that the euro area expanded only 0.1 percent in the third quarter. The slowdown was caused primarily by the weaker performances of Germany and France.
Data suggests that a weaker contribution from net trade was responsible for the slowdown in Germany. This will fuel concerns about the adverse effects on growth of the strong euro, the economist noted.
The economist, however, observed that survey indicators tentatively pointed to a slightly stronger start to the fourth quarter. Moreover, the European Central Bank has responded to the slowdown with a rate cut.
Nonetheless, GDP figures are a clear blow to hopes that the period of market stability seen over the last year or so would translate into a solid and sustained economic recovery, he said.
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