Are the ECB’s Gloomy Economic Forecasts Overly Dramatic?

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Although the stream of gloomy economic data for the euro zone continues unabated, new downbeat forecasts by the European Central Bank's staff as well as Germany's central bank are too negative, Giles Keating, Head of Research at Credit Suisse said on Friday.

The ECB on Thursday revised its forecasts for 2013 euro zone growth down significantly. It now expects gross domestic product in a range of falling by 0.9 percent to growing by just 0.3 percent next year. Germany's Bundesbank on Friday morning cut its forecast for growth in the euro zone's largest economy. It now expects Germany's economy to grow 0.7 percent this year, down from an earlier forecast of 1.0 percent, and 0.4 percent next year.

"The Bundesbank is over-egging it a bit on the negative side as is the ECB. It's a very dramatic swing-round of GDP projections. German production data shows a small and brief dip but then it recovers. People get all the bad media and then fill in the forms a bit biased," Keating told CNBC.

Carsten Brzeski, Senior Economist at ING Belgium said the ECB had been "surprisingly downbeat" in its economic outlook.

"Despite this downbeat economic outlook the ECB kept rates on hold, risks to the economic outlook are still to the downside [but] it looks as if there are diverging views on the outlook within the ECB. Draghi's comment that there was a 'prevailing consensus' to leave rates unchanged indicates that some ECB members must have been in favor of a rate cut," Brzeski said in a note.

However, some analysts believe that the gloomy forecasts do not go far enough in showing the full extent of the weak economic environment we could see next year.

In a note, Jennifer McKeown, senior European economist at Capital Economics said that the ECB had become "far gloomier" about the growth outlook but that its own forecasts suggested a deeper and prolonged recession, with a fall of around 2.5 percent next year.

"In all, the press conference will have provided little comfort to those hoping that the euro zone crisis might be past its worst. Even the ECB now thinks that the recession will be a long one but for now seems unwilling to or unable to do much to prevent it," McKeown said.

Market Disconnect

European equity markets seem to have brushed off the worst of the negative forecasts, with Germany's DAX on Thursday defying the downbeat assessment of the euro zone bloc by ECB President Mario Draghi.

The benchmark Dax index rose to a five-year high – up by almost 28 percent for the year – with Keating suggesting that a new assessment of the euro zone's health is due.

Keating said he remained cautiously optimistic on the fortunes for both markets and earnings in the New Year.

"I would be reasonably constructive, both the S&P and the Dax can put in respectable growth next year, economic growth is not the totality. [With] earnings growth there was an understanding that analysts were revising downwards and there are a lot of signals that is now coming to an end.We can see earnings growth next year, in particular Germany which is very much about exports. The U.S. also has the potential to surprise to the upside," he added.

By CNBC's Shai Ahmed, Follow her on Twitter @shaicnbc