Although signs of stabilization are emerging in the eurozone, the European Central Bank (ECB) is still far from exiting or scaling back its monetary stimulus policies, said the HSBC in a report on Monday.
"There have been a few tentative signs of stabilization, or at least less deep recessions, in most of the eurozone. Among the purchasing manager's index (PMIs), the export orders for Spain and Italy have recovered strongly. However, the kind of recovery we are forecasting is still feeble," said the HSBC in its quarterly report.
The political and economic challenges for the eurozone remain enormous and with the U.S. Federal Reserve making noises about starting to normalize policy, the ECB's task of keeping monetary policy appropriately loose for the monetary union has just recently got harder, highlighted the HSBC.
"Growth is still not coming back, unemployment rates are rising to socially unacceptable levels and debt projections continue to be revised up. The limits to austerity are being reached and populations and politicians are becoming more vocal in saying so: Portugal is the most recent example," the report said.
The HSBC forecast that the eurozone GDP growth would be only 0.6 percent in 2014, 0.5 percentage point lower than the ECB's expectation.
