19 Nov 2013
OECD lowers 2014 global growth forecast to 3.6%
FXstreet.com (Barcelona) - The OECD released its updated growth forecasts on Tuesday, cutting the projections for global GDP to 3.6% in 2014, down from the 4% seen in May and justifying this move with the slowdown evident in emerging markets and the sluggish recovery in developed nations.
"We've lowered our forecasts for many reasons, but the most important one is the downgrade in growth in the emerging countries," OECD chief economist Pier Carlo Padoan explained. He added that the economic troubles of these markets could affect advanced economies especially the Eurozone and Japan.
The Paris-based think tank believes that the the euro area, where the recovery is “lagging and uneven” will grow by a mere 1% in 2014. The unemployment in the region remains elevated and inflationary pressures subdued, while the crippled banking system weighs on growth prospects. The ECB should therefore ease its monetary policy further
The OECB also pointed to the uncertainty surrounding the US fiscal policy as one of the major risks for the global economy and urged the Federal Reserve to maintain an accommodative stance for some more time before it starts reducing the pace of its monthly asset purchases.
“The Fed is in a very tricky position,” Padoan said in an interview. “Many people were surprised by the huge reaction when discussion about tapering was introduced. The Fed has to re-assess market reactions and this makes deciding when to taper more difficult. But it will have to happen eventually.”
In the Economic Outlook report the OECD also called for abolishing the US debt ceiling and devising a "a credible long-term budgetary consolidation plan with solid political support."
The OECD was more optimistic on China's prospects which is seen successfully adjusting its policy to the changing economic environment. Nevertheless the country's 2014 GDP forecast was cut to 8.2%, from 8.4% in May. The projection for Japan was raised from 1.4% to 1.5% next year.
"We've lowered our forecasts for many reasons, but the most important one is the downgrade in growth in the emerging countries," OECD chief economist Pier Carlo Padoan explained. He added that the economic troubles of these markets could affect advanced economies especially the Eurozone and Japan.
The Paris-based think tank believes that the the euro area, where the recovery is “lagging and uneven” will grow by a mere 1% in 2014. The unemployment in the region remains elevated and inflationary pressures subdued, while the crippled banking system weighs on growth prospects. The ECB should therefore ease its monetary policy further
The OECB also pointed to the uncertainty surrounding the US fiscal policy as one of the major risks for the global economy and urged the Federal Reserve to maintain an accommodative stance for some more time before it starts reducing the pace of its monthly asset purchases.
“The Fed is in a very tricky position,” Padoan said in an interview. “Many people were surprised by the huge reaction when discussion about tapering was introduced. The Fed has to re-assess market reactions and this makes deciding when to taper more difficult. But it will have to happen eventually.”
In the Economic Outlook report the OECD also called for abolishing the US debt ceiling and devising a "a credible long-term budgetary consolidation plan with solid political support."
The OECD was more optimistic on China's prospects which is seen successfully adjusting its policy to the changing economic environment. Nevertheless the country's 2014 GDP forecast was cut to 8.2%, from 8.4% in May. The projection for Japan was raised from 1.4% to 1.5% next year.