OECD says advanced economies growing, not emerging ones

Sept. 4, 2013 at 2:14 AM
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PARIS, Sept. 4 (UPI) -- Economic growth has slowed in some large emerging economies while major advanced economies are experiencing a moderate recovery, reports the OECD.

"Since they now account for a large share of the world economy, the slowdown in the emerging economies points to sluggish near-term growth globally, despite the pick-up in the advanced economies," the Organization of Economic Cooperation and Development said in its latest interim economic assessment.

The group, based in Paris, said growth is proceeding at "encouraging rates" in North America, Japan and Britain. The euro area as a whole is out of recession but output remains weak in a number of countries.

One reason for the slowing growth in some of the large emerging is the rise in global bond yields due largely to expectations of a tapering of U.S. Federal Reserve's quantitative easing, leading to market instability and capital outflows from economies such as that of India and Indonesia, the report said.

The report said growth in the major advanced economies is expected to continue at a similar pace in the second half of 2013 as in the second quarter. In the United States, Japan and Germany, the three largest OECD economies, activity is "expected to expand by about 2 1/2 percent annualized in the third and fourth quarters."

France is forecast to grow by about one-and-one-half per cent in the second half of the year.

China's growth is forecast to pick up to about 8 percent by the final quarter, after a slowdown in the first half of 2013.

"The gradual pickup in momentum in the advanced economies is encouraging but a sustainable recovery is not yet firmly established. Major risks remain. The euro area is still vulnerable to renewed financial markets, banking and sovereign debt tensions," Jorgen Elmeskov, OECD deputy chief economist, said.

"High levels of debt in some emerging markets have increased their vulnerability to financial shocks. And a renewal of brinksmanship over fiscal policy in the U.S. could weaken confidence and trigger new episodes of financial turmoil."

He said continued support for demand is still needed to make sure recovery takes hold. Support for demand should be accompanied by structural reforms to boost growth and to prevent structural employment from rising.

The report said unemployment rates currently are around 12 percent in the euro area and 7.5 percent in the United States, which are far above pre-crisis levels.

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