OECD cuts world economic forecast

Wed May 29, 2013 8:37am EDT
 
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By Leigh Thomas

PARIS (Reuters) - The recession-hit euro zone will fall further behind a generally improving United States and a rebounding Japan this year, the OECD said on Wednesday, cutting its global growth forecasts.

In its twice-yearly Economic Outlook, the Organisation for Economic Cooperation and Development forecast the world economy would grow 3.1 percent this year before accelerating to 4 percent in 2014.

The estimates marked a slightly more pessimistic view after in November the Paris-based think tank forecast global growth of 3.4 percent this year and 4.2 percent next year.

The United States was seen driving global growth with the world's biggest economy projected to expand 1.9 percent this year and then accelerating to 2.8 percent in 2014, which would be the country's best rate since 2005.

In contrast, the euro zone was estimated to remain in recession for a second year. The OECD sees its economy contracting 0.6 percent in 2013 and then returning to growth next year with a rate of 1.1 percent.

However, the outlook diverged widely within the 17-nation bloc with regional powerhouse Germany seen achieving growth of 0.4 percent and rebounding to a rate of 1.9 percent in 2014.

After years of debt crisis testing the euro zone's capacity to hold together, OECD chief economist Pier Paolo Padoan said that risks to the economic outlook have finally begun to recede.

However, he warned that the easing in the euro zone's debt crisis may lead to reform fatigue.   Continued...

 
People shop at a Target store in Westbury, New York November 23, 2012. REUTERS/Shannon Stapleton