The risks to this outlook are broadly balanced, but surrounded by a high degree of uncertainty. Following the substantial weakening of the world economy in the wake of the financial turmoil, real GDP growth in the euro area contracted markedly, by 1.5% on a quarterly basis, in the fourth quarter of 2008.
The latest information suggests that economic activity has deteriorated further in the first quarter of 2009. Looking ahead, we expect demand to remain very weak throughout 2009, both at the global level and in the euro area, before gradually recovering in the course of 2010. As is the case for inflation, this outlook remains surrounded by uncertainty.