OECD: economic recovery slower than projected
The global economic recovery is proving slower than projected and policy makers may need to extend or bolster stimulus programs to support it, the Organization for Economic Cooperation and Development said.
Recent data suggest the economy of the Group of Seven nations could grow at an annual rate of about 1.5pc in the second half, below the 1.7pc previously envisaged and the 3pc rate of the first six months of the year, the Paris-based organisation said today.
“Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously expected,” Pier Carlo Padoan, the OECD’s chief economist, said in a report.
The outlook comes as investors signal worries that the global rebound from last year’s recession is fading as stimulus ebbs and governments look to cut back record budget deficits. The MSCI World Index of stocks is down about 9pc since mid-April.
If the slowdown is temporary, then policy makers should postpone the withdrawal of monetary support for a few months, while maintaining plans to cut fiscal deficits to reassure investors, the OECD said.
If growth is threatened for longer, then central banks may need to buy assets and commit to near-zero interest rates for a long period and governments may need to delay budget cuts, it said.
The OECD projected growth in the G7 economies of 1pc in the final three months of the year on an annual quarter-on-quarter basis.
That would be the slowest since the second quarter of last year, and below the 1.4pc projected for the current quarter.
The US’s expansion will slow to 1.2pc in the next quarter from 2pc, the report said. Japan will grow 0.6pc and 0.7pc in the last two quarters of the year, while German growth will accelerate to 1.1pc from 0.7pc, the report said.
Italy will contract 0.3pc this quarter before expanding 0.1pc in the next three months, and French growth will fade to 0.3pc from 0.7pc, the OECD said.
The UK will expand 2.7pc in the third quarter before slowing to 1.5pc in the fourth quarter and Canada will grow 2.2pc and 2.3pc over the two periods, it said.
Private consumption may be constrained as consumers tackle their debts and worry about unemployment, the report said.
Weak growth and doubts about the ability of governments to pay their debts may hurt the financial system, it said. The recoveries in world trade and housing markets are also losing momentum, it added.
At the same time, low levels of private investment mean it’s unlikely to weaken much further, emerging markets are showing robust growth and overall financial conditions have stabilised, it said.
Underlying inflation continues to moderate in major OECD economies amid excess capacity, while price pressures have surfaced in large emerging-market economies, it said.