Euro zone recovery hopes fade further into 2013: Reuters poll

A customer shops for fruits in a market near Rome December 12, 2012.

LONDON (Reuters) - Chances of a recovery for the euro zone economy have faded further into 2013, according to a Reuters poll of economists who say the recession has deepened over the last three months.

Huge questions over the health of some of the region's biggest economies make any kind of major rebound for the euro zone extremely unlikely next year. That may have to wait until 2014, and quite possibly later.

The currency union will see no better than stagnation early next year, before finally achieving paltry growth of around 0.2 percent in the second quarter, Wednesday's poll of more than 70 economists showed.

The outlook represents a new low since Reuters started polling on the 2013 outlook in January. No economist in the survey now believes the euro zone economy grew in the current quarter.

Overall, economists expect a full year average growth rate of zero for next year.

The region as a whole is reliant on Germany as the biggest driver of economic growth, and the signs from there have been ominous.

"Key German surveys have shown few signs of recovery in Q4 so far and industrial production collapsed by 2.6 percent in October," said Philip Shaw, chief economist at Investec, in a research note.

"Hence the upturn is further away than seemed to be the case and we have slashed our 2013 euro area GDP forecast to -0.4 percent from +0.3 percent previously."

Economists now believe the economy has shrunk this quarter by 0.3 percent rather than the 0.2 percent forecast last month, which would mean the recession has deepened from the 0.1 percent decline reported for the third quarter.

Despite a clear consensus on the poor health of the economy, respondents were split right down the middle over what else the European Central Bank will do about it, if anything.

Thirty-nine economists think it will hold its main refinancing rate at its current record low of 0.75 percent through the first quarter of next year, while 38 believe the ECB will cut it to 0.5 percent.

That analysts are so divided is little wonder as the ECB's Governing Council members are similarly split.

"At least one member of the Governing Council has voted for a rate cut, which ECB President Mario Draghi said could happen if the outlook deteriorates further," said Azad Zangana, economist at Schroders, who thinks the ECB is more likely to stay on hold.

Whatever the ECB eventually decides to do, inflation looks unlikely to stand in its way.

The poll showed inflation falling beneath the bank's 2 percent target ceiling in the second quarter next year, where it looks set to stay through to midway next year.

Economists put only a median 25 percent chance on Greece leaving the euro zone next year, echoing the findings of an October poll which found that just eight of 34 fund managers foresaw such an event.

(Polling and analysis by Deepti Govind and Sarmista Sen. Editing by Jeremy Gaunt.