By Alex Pigman ,AFP
November 20, 2013, 12:11 am TWN
PARIS -- Growth in advanced economies will pick up speed this year and next, but mostly at a slower pace than forecast as new risks loom, especially from emerging economies, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.
Japan and the eurozone will do slightly better than expected in both years as austerity policies retreat, monetary stimulus is maintained and financial conditions improve, the OECD said.
But the U.S. economy will grow less quickly than forecast, with the OECD pointing to political dysfunction in Washington and the eventual tapering of monetary stimulus as factors that could hamper recovery.
The organization, a 34-nation policy forum for developed democracies, revised global growth of gross domestic product down by nearly half a percentage point both this year, to 2.7 percent, and next, to 3.6 percent.
In a first estimate for 2015, it foresaw growth of 3.9 percent.
Global “outcomes this year and near-term prospects appear a little weaker than had been expected in May, at the time of the previous Economic Outlook,” the OECD said.
The future of monetary stimulus in the United States has become a central risk worldwide, the OECD said, adding to long-standing problems, such as the fragility of eurozone banks and a decade of soaring Japanese public debt.
The OECD urged the U.S. Federal Reserve central bank to maintain its ultra-easy monetary policy for some time, and it suggested that the European Central Bank consider extra action to relax monetary conditions if deflationary pressures increased.
The latest OECD outlook report said that old worries “have been augmented by new concerns, most notably the possibility of significant financial instability in advanced and, especially, (emerging economies) during the exit from unconventional monetary policies in the United States.”
Emerging economies, until recently a driver of global activity, could become a drag.
Moreover, the OECD warned, if political battles in Washington were to make a debt ceiling in the United States binding next year, the outcome could have “extreme” effects on the world economy.
Any automatic policy to cut spending by the U.S. government “could have large adverse effects on the stability and growth of the world economy,” it said.
“To prevent the possibility of such disruptive effects”, the debt ceiling currently being fought over in U.S. Congress “should be abolished.”
The forecast for U.S. growth in 2013 was slashed to 1.7 percent from 1.9 percent, but edged up to 2.9 percent for 2014.
The OECD said that efforts to slow fiscal consolidation in the U.S. and the eurozone were appropriate given slightly improving public finances and the uncertain economic outlook.
Japan on the other hand, must implement “strong fiscal tightening” in order to cut its debt.
But despite this overhang, Japan's recent efforts to jumpstart the economy will bear fruit with the OECD now forecasting 1.8-percent growth in 2013 instead of 1.6 percent. In 2014, Japanese growth will slow to 1.5 percent, hobbled by debt.
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