Economic contraction in the euro area in the fourth quarter was deeper than initially estimated, official data revealed Tuesday.

Final report from the Eurostat showed that gross domestic product, or GDP, contracted by a record 1.6% quarter-on-quarter in the final three months of 2008. The pace of decline was slightly up from the previously estimated fall of 1.5%. GDP fell 0.3% each in the previous two quarters.

The statistical office also revised fourth-quarter annual GDP decline to 1.5% from an initial 1.3% fall. For the whole year, the economy expanded 0.8%, slower than 2.6% growth recorded in 2007.

In the fourth quarter, household final consumption expenditure fell 0.3% from the previous quarter, while government expenditure rose 0.4%. Gross fixed capital formation continued to decline for the third straight quarter with the fourth quarter marking a 4% fall.

The currency bloc's exports fell 6.7% in the fourth quarter after decreasing 0.2% in the third quarter. At the same time, imports dropped 4.7%, reversing a 1.3% rise in the prior quarter.

After the release of the exceptionally bleak figures, the European currency declined to a 5-day low against the yen and the dollar.

Despite indications that the 16-nation bloc is sliding deeper into recession, the European Central Bank on April 2 lowered its key interest rates less than expected.

In its meeting held in Frankfurt, Germany, the Governing Council reduced the bank's key interest rate, which is the rate on the main refinancing operations, by a quarter percentage point. The reduction took the benchmark rate to an all-time low of 1.25%.

ECB President Jean-Claude Trichet signaled that there is still room to cut the benchmark interest rate for Eurozone and said the world economy is undergoing a severe downturn.

In his introductory statement after announcing the monetary policy decision, Trichet said, Both global and euro area demand are likely to remain very weak over 2009, before gradually recovering in the course of 2010.

Late in March, the Organisation for Economic Co-operation and Development, or OECD, had said in its interim economic outlook that the Eurozone GDP was forecast to fall 4.1% in 2009 and by 0.3% next year.

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