World growth forecast cut to 3.4% as OECD warns of risks
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SETBACKS for emerging markets and rising risks of fallout from the Ukraine crisis are holding back the global economic recovery, the OECD said yesterday.
The global economy is now set to grow by 3.4 percent this year, it forecast, trimming its outlook by 0.2 points. It held its forecast that the world economy would grow by 3.9 percent next year.
Central banks must go on shoring up growth, the Organization for Economic Cooperation and Development said.
The OECD said the events in Ukraine had increased geopolitical uncertainty, “with the downside risk that this could have a significant adverse impact on growth, especially in many Central and Eastern European economies.”
“The near-term outlook is for global activity and world trade to strengthen gradually through the rest of this year and 2015,” it said in its semi-annual Economic Outlook report. “However, still-high unemployment in many countries and the subdued pace of growth in many emerging economies relative to past norms are likely to limit the momentum of the recovery.”
Although the eurozone has perked up, the OECD trimmed its forecasts for US growth after a bitter winter. Higher taxes in Japan and tighter credit conditions in China were also slowing growth.
The OECD raised its forecast for eurozone growth by 0.2 points to 1.2 percent this year, and sees growth accelerating to 1.7 percent in 2015.
It trimmed its US growth forecast this year by 0.3 points to 2.6 percent due to the harsh winter, but it sees growth picking up throughout the rest of this year and rising to 3.5 percent in 2015.
It trimmed by 0.3 points its forecast for Japanese growth this year to 1.2 percent, and the OECD expects the same growth rate in 2015.
The report pointed to uncertain prospects in China due to credit tightening and the fragility of the banking system, further turbulence in emerging markets as the US winds down its monetary stimulus program, and greater geopolitical risks due to Ukraine.
The OECD cut its forecast for Chinese growth this year by 0.8 percentage points to 7.4 percent owing to tighter credit conditions, and its sees similar growth of 7.3 percent next year.
Investors have been preoccupied with slowdown in China, the world’s second-largest economy. Of particular concern has been the fragility of the banking sector, after the rapid rise in lending that has fueled growth in past years.
The OECD warned similar rapid increases had “presaged financial crises for advanced countries in the past.”
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