PARIS, (PNA/Xinhua) — The growth of the global economy remain sluggish, despite a stronger than expected recovery in major advanced economies, the Organization for Economic Cooperation and Development (OECD) said on Tuesday.
In the second quarter of 2013, growth in the major advanced economies, including the G7 countries, was stronger than forecast, but it has slowed in some large emerging economies, suggesting “a sluggish near-term growth globally,” said the OECD in its latest assessment report on global economy forecast.
The Paris-based international economic forum foresees the growth in the major advanced economies to continue at a similar pace in the second half of 2013 as in the second quarter.
“Activity is expanding at encouraging rates in North America, Japan and the United Kingdom,” observed the OECD.
“The gradual pick-up in momentum in the advanced economies is encouraging but a sustainable recovery is not yet firmly established,” said OECD Deputy Chief Economist Jorgen Elmeskov during the present of the Assessment in Paris.
According to the OECD survey, the United States is set to witness a growth of 2.5 percent in the third quarter and 2.7 percent in the last three months of 2013, but the economic organization trimmed its annual projection from a May’s forecast of 1.9 percent to 1.7 percent.
Japan will see its economy grow by 2.6 percent in the third quarter and 2.4 percent in the fourth quarter, and will keep at the May’s projection of 1.6 percent by the yearend.
Britain will enjoy a growth of 1.5 percent in 2013, a jumping-up from the previous forecast of 0.8 percent.
The OECD said the euro area as a whole is out of recession, and its three largest economies: Germany, France and Italy, could have an overall growth rate of 0.4 percent this year.
A big surprise in the OECD report is the forecast for the growth of France, which is updated from the previous projection of a contraction of 0.3 percent to a rise of 0.3 percent in 2013.
Germany will lead the growth in the bloc, by an increase of 0.7 percent, revised up from a May’s projection of 0.4 percent. However, Italian growth is to remain slightly negative, but the gap is expected to be slightly narrowed.
However, “the euro area is still vulnerable to renewed financial markets, banking and sovereign debt tensions,” said Elmeskov.
The assessment observed that growth has slowed in some of the large emerging economies.
“High levels of debt in some emerging markets have increased their vulnerability to financial shocks. And a renewal of brinkmanship over fiscal policy in the U.S. could weaken confidence and trigger new episodes of financial turmoil,” warned the OECD economist.
After a slowdown in the first half of this year, China’s economy is apparently to “have passed the trough, financial market turbulence” and looks set to recover further in the second half of 2013, said the OECD, while estimating that the growth in China could reach 7.4 percent in 2013.
The OECD analyzed that the factor that has caused the slowdown in emerging economies mainly derives from a rise in global bond yields, “triggered in part by an expected scaling back of the U.S. Federal Reserve’s quantitative easing, which has fueled market instability and capital outflows in a number of major emerging economies, such as India and Indonesia.”
“Continued support for demand is still needed to make sure recovery takes hold, and it remains vital that this be complemented by structural reforms to boost growth, rebalance the global economy and avoid a ratcheting-up of structural unemployment,” said Elmeskov.
The Interim Economic Assessment says public finances have been improving in most advanced economies, with the exception of Japan, but that fiscal consolidation policies must continue.
Such policies need to be better designed, however, to protect the most vulnerable in society, to build public support for necessary structural reforms and to prioritize spending to help get people back to work.