Emerging economies are driving the global economy as output in Europe and North America stutters, says a progress report from the Organisation of Economic Co-operation and Development (OECD).
A dampening of the US economy and the lack of growth in the Eurozone held back growth, but the forecast is for new policies to kick start growth in the US.
Any European recovery is expected to take a while – with Germany picking up over the first half of the year but growth slipping back or remaining slow for other countries.
However, emerging economy growth is speeding ahead of the rest – with China expected to hit 8% or more for the year.
The OECD expects G7 economies – including the UK, US and Japan – to show an average growth of 2.4% in the first three months of 2013 and 1.8% in the next quarter.
Brave action
The report also points out that business and consumer confidence are making financial markets are riding on a wave of confidence and may be outstripping the real value of the underlying assets.
“The global economy slowed at the end of last year, but the forecast is improving for OECD economies,” said OECD Chief Economist Pier Carlo Padoan. “Governments still need to take brave action to underwrite recovery, especially in the eurozone, where economies are faltering and slower than elsewhere.
“Unemployment continues to grow in many countries, making labour and market reforms that help growth and make jobs even more important.”
Economic improvement in the United States was hit by a number of one-off factors in the last three months of 2012, but the OECD predicts a 3.5% turnaround at the start of 2013, before the nation sinks to 2.0% the next quarter.
Risk warning
Padoan forecasts the Japanese economy will speed up from sluggish levels to growth of 3.2% during the three months of 2013, receding to 2.2% in the second, while the United Kingdom is tipped to hit 0.5% growth in the first quarter, rising to 1.4% in the next three months.
Despite the gloom expected to lift on many economies over the next few months, the OECD still considers quantitative easing as a tool for easing fiscal problems in many nations, and warns governments should not take risky decisions about their economies.
The report cites low OECD inflation rates as giving room for monetary action should more stimulus be needed to lift an economy clear of recession.
Read full OECD report here https://www.oecd.org/economy/outlook/economicoutlook.htm
