ECB Slashes Eurozone Economic Forecast

The European Central Bank has revised downward its outlook for the eurozone economy in 2013 to 0.3% contraction from its previous forecast of 0.5% growth.

The ECB also now expects gross domestic product in the 17-country bloc to shrink 0.5% this year, 0.1 point worse than its earlier projection.

"Persistent uncertainty" is weighing on consumer and business confidence, according to the central bank. It cites the eurozone's continuing sovereign debt crisis, geopolitical issues and U.S. fiscal policy.

The ECB predicts the region's economy will contract 0.5% in early 2013 before stronger global demand and improving financial market sentiment spur a modest revival later in the year. The bank projects eurozone expansion of 0.2% to 2.2% in 2014.

The ECB held its benchmark interest rate at its record low of 0.75%, where it has been since July. Economists expect a rate cut early next year.

The Bank of England also decided today to keep its key interest rate unchanged at 0.5%.

Separately, EU statistics agency Eurostat confirms its earlier estimate that GDP shrank 0.1% in the eurozone in the third quarter and grew 0.1% in the 27-country EU.