The euro zone economy may shrink by around 0.2-0.3 per cent as a north-south divide in output worsens, European Central Bank policymaker Ewald Nowotny has said.

"In Europe we have to assume a negative development in 2013 that can be around minus 0.2 or 0.3 per cent," he told Austrian newspaper the Vorarlberger Nachrichten, citing a "massive economic divergence between the southern and other countries that could get even worse".

ECB staff projected in December that euro zone economic output this year would range between a contraction of 0.9 per cent and growth of 0.3 per cent.

The currency region slipped deeper into recession in the last three months of 2012 after its largest economies, Germany and France, shrank at the end of a wretched year for the region.

Mr Nowotny, who also heads the Austrian National Bank, said it may raise its growth forecast for the domestic economy to 0.7-0.9 per cent from its most recent outlook of 0.6 per cent.

Reuters