The European Central Bank slashed its forecasts for the euro zone economy on Thursday, showing a contraction next year was very likely before a return to growth in 2014.

The ECB cut its estimate of gross domestic product (GDP) for next year to between a fall of 0.9 percent and growth of just 0.3 percent.

The bank also cut its forecast marginally for 2012, giving a midpoint of -0.5 percent compared to -0.4 percent three months ago.

It had previously forecast -0.4 percent to 1.4 percent for 2013, suggesting the economy was more likely to grow than contract.

"Economic weakness in the euro zone is expected to extend into next year," Draghi said. "A gradual recovery should start later in 2013."

In their first forecasts for 2014, ECB staff forecast GDP growth of 0.2 to 2.2 percent.

The December macroeconomic projections also lowered forecasts for inflation next year to between 1.1 and 2.1 percent from a previous forecast of 1.3-2.5 percent.