Private forecasters were already predicting lower euro zone growth and inflation before the attacks in the United States last week, the European Central Bank (ECB) said today.
According to a quarterly survey of professional forecasters that the ECB conducted in August, inflation would average 1.9 per cent next year - just beneath the bank's self-imposed threshold of policy tolerance, with GDP growth of 2.4 per cent.
The survey confirms a clear deterioration in optimism among the forecasting community had been under way before the carnage of last week's attacks forced European officials to acknowledge the risk of a recession this year.
The ECB published the survey's results in its September monthly bulletin.
Analysts warn the danger of a prolonged downturn following the destruction is much greater if it turns out that growth had already been weakening when the hijacked planes plunged into the World Trade Center and Pentagon.
The survey's findings also mesh with ECB predictions that inflation will return to levels below 2 per cent soon and that weaker conditions in the real economy will blunt wage demands and other price risks.
This could turn out to be a key consideration if pressure mounts for further rounds of coordinated G7 rate cuts to shelter global growth as US and allied military retaliation unfolds.
According to the survey, growth for 2001 was only expected to be 2 per cent, versus previous hopes for 2.5 per cent. When they were polled in May, analysts in the survey had forecast 2002 growth of 2.6 per cent.