The eurozone economies are steadily improving

The 12 eurozone economies are set to grow about 0.6% in the early part of 2006 with output strengthening later in the year, according to the Commission.

It is predicting annual growth of 1.9% across the euro bloc in 2006 - although some experts envisage stronger growth.

The improved outlook could lead to a further rise in interest rates.

Better outlook

The European Central Bank left rates unchanged at 2.25% on Thursday, having raised them by a quarter of a point in December.

Many economists believe another rise is on the cards in the near future, as the Bank remains concerned about inflationary pressures.

I think generally all the numbers we are seeing at the moment are consistent for a more upbeat outlook for eurozone growth David Brown, Bear Sterns

In a report published on Friday, the European Commission said the eurozone was forecast to enjoy growth of between 0.4% and 0.9% between April and June.

This would represent a slight increase on the previous two quarters, in which growth of between 0.4% and 0.8% is estimated.

Separate figures from Eurostat, the European Commission's statistics office, confirmed that GDP grew 0.6% in the third quarter of 2005, up from 0.4% in the previous period.

David Brown, chief european economist at Bear Stearns, said he expected the ECB to raise rates by three quarters of a point this year.

"I think generally all the numbers we are seeing at the moment are consistent for a more upbeat outlook for eurozone growth," he said.

Reservations

However, some experts pointed to a less favourable outlook for business investment during 2006.

Phyllis Papadavid, from Lehman Brothers, said she expected growth to be at the lower end of the Commission's forecasts.

"We think it likely that investment spending and export growth slowed to about half the pace registered in the third quarter," she said.