OECD sees mixed outlook for growth in global economies

The Organisation for Economic Cooperation and Development (OECD), which comprises the world's leading industrialised nations, said Tuesday that "a moderate recovery is underway" in the major economies in the world, but that some "large emerging economies" are showing signs of slowing growth. In its "interim assessment" of the world economy, published Tuesday, the OECD said growth was showing "encouraging rates in North America, Japan and the UK," and also in other part of Europe. "The euro area as a whole is out of recession, although output remains weak in a number of countries," the report said. The Euro zone includes 18 of the European Union nations, including economic powerhouses like Germany and France, but also troubled countries like Spain, Italy, Portugal and Greece. "Economic 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 three largest OECD economies, the US, Japan and Germany, activity is expected to expand by about 2.5 percent annualised in the third and fourth quarters," the OECD indicated, even if annual rates in 2013 are set to be lower than in 2012. "France is forecast to grow by about 1.5 percent annualised in the second half of the year, while in Italy growth is expected to remain mildly negative, " according to the report. The OECD did express come concern about trends in larger emerging economies, among them China, where growth rates are slowing. Even so, Gross Domestic Product (GDP) expansion in China "is forecast to pick up to about 8.0 percent in the second half of 2013." But growth is still predicted to only reach 7.4 percent for the full year, compared with 7.8 percent in 2012. "One factor has been a rise in global bond yields - triggered in part by an expected scaling back of the US Federal Reserve's quantitative easing - which has fuelled market instability and capital outflows in a number of major emerging economies, such as India and Indonesia," the assessment stated. Emerging economies now account for a large share of the world economy so the slowdown in theses nations could produce sluggish near-term growth globally, despite the pick-up in the advanced economies, the report cautioned. OECD Deputy Chief Economist Jorgen Elmeskov said in comments to the press that "the gradual pick-up in momentum in the advanced economies is encouraging but a sustainable recovery is not yet firmly established." He warned that "major risks remain" and the Euro area is still not safe from renewed financial markets, banking and sovereign debt tensions. In addition, some emerging economies are exposed to high levels of debt, which makes them vulnerable to financial shocks. "Brinkmanship" and disruptions in US Fiscal Policy could weaken overall confidence and provoke new episodes of "financial turmoil," Elmeskov warned. "Continued support for demand is still needed to make sure recovery takes hold," he said, adding that this support must be accompanied by structural reforms that would rebalance the world economy and prevent a growth in structural unemployment, which is currently averaging 12.0 percent in OECD nations.