The European Commission today confirmed it has cut its forecast for eurozone growth to 1.0pc for 2003 from 1.8pc, and warned of a recession if oil prices soar and confidence drops as a result of the war against Iraq. In its spring economic forecasts, the Commission also reduced its projection for eurozone growth next year to 2.3pc from 2.6pc previously. It confirmed its forecast that eurozone growth could fall to 0.2pc this year if oil prices reach USD35 per barrel and confidence plummets due to the war. Under its more pessimistic scenario, the commission sees eurozone growth of 1.5pc next year on the basis of an average oil price of USD27.6.
"In this scenario, the projected acceleration of world growth in 2003 would not materialise, and also next year the consequences of the higher oil prices and the general worsening of the international environment would be felt," it said. "Both the US and the EU would face a recession - two quarters of GDP contraction - in 2003, which would be particularly sharp in the euro area because growth in the baseline is already weak," it added. ///www.fxcentre.com