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OECD suggests Europe's woes weighing down world economy
Source: Agencies |
November 28, 2012, Wednesday
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THE world's economic recovery will be "hesitant and uneven" next year, with Europe's debt troubles weighing on more vibrant economies such as the United States and in the developing world, the OECD said yesterday.
Even so, the Organization for Economic Cooperation and Development said it expects the world economy to grow by 3.4 percent next year, up from 2.9 percent this year.
The estimate marked a sharp downgrade since the OECD last estimated a rate in May of 3.4 percent for this year and 4.2 percent in 2013.
The agency said it is gloomier about Europe than it was six months ago. It now predicts a 0.4 percent contraction this year for the 17-country eurozone and a 0.1 percent fall next year. In May, the OECD forecast the eurozone economy to shrink just 0.1 percent this year and grow 0.9 percent in 2013.
It also downgraded forecasts for the US economy, predicting 2 percent growth next year, compared with 2.6 percent forecast for 2013 in the last economic outlook.
The OECD also cautioned that growth outside the OECD - comprising 34 developed economies mostly in North America and Europe - would be slightly faster but crimped by Europe's troubles.
"A slowdown has surfaced in many emerging market economies, partly reflecting the impact of the recession in Europe," the report said.
The OECD also warned the US and Europe against cutting spending too sharply and too quickly, saying that could further hurt growth prospects. "Global prospects remain fragile, with strong downside risks, and are heavily dependent on the speed and decisiveness of policy actions," it said.
It warned unemployment would continue to rise in the eurozone from 11.1 percent this year to 12 percent in 2014, but that the rate in the US would gradually decline to 7.5 percent in 2014.
The OECD warned more needs to be done to link eurozone economies closer and said progress toward a banking union is "essential" to stabilizing the euro.
It expressed concern over the so-called fiscal cliff in the US, automatic tax increases and steep spending cuts that take effect in January unless US President Barack Obama and Congress reach a deal.
"If the fiscal cliff is not avoided, a large negative shock could bring the US and the global economy into recession," the report said.
Even so, the Organization for Economic Cooperation and Development said it expects the world economy to grow by 3.4 percent next year, up from 2.9 percent this year.
The estimate marked a sharp downgrade since the OECD last estimated a rate in May of 3.4 percent for this year and 4.2 percent in 2013.
The agency said it is gloomier about Europe than it was six months ago. It now predicts a 0.4 percent contraction this year for the 17-country eurozone and a 0.1 percent fall next year. In May, the OECD forecast the eurozone economy to shrink just 0.1 percent this year and grow 0.9 percent in 2013.
It also downgraded forecasts for the US economy, predicting 2 percent growth next year, compared with 2.6 percent forecast for 2013 in the last economic outlook.
The OECD also cautioned that growth outside the OECD - comprising 34 developed economies mostly in North America and Europe - would be slightly faster but crimped by Europe's troubles.
"A slowdown has surfaced in many emerging market economies, partly reflecting the impact of the recession in Europe," the report said.
The OECD also warned the US and Europe against cutting spending too sharply and too quickly, saying that could further hurt growth prospects. "Global prospects remain fragile, with strong downside risks, and are heavily dependent on the speed and decisiveness of policy actions," it said.
It warned unemployment would continue to rise in the eurozone from 11.1 percent this year to 12 percent in 2014, but that the rate in the US would gradually decline to 7.5 percent in 2014.
The OECD warned more needs to be done to link eurozone economies closer and said progress toward a banking union is "essential" to stabilizing the euro.
It expressed concern over the so-called fiscal cliff in the US, automatic tax increases and steep spending cuts that take effect in January unless US President Barack Obama and Congress reach a deal.
"If the fiscal cliff is not avoided, a large negative shock could bring the US and the global economy into recession," the report said.
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