OECD raises global growth forecasts

| May 26, 2010
”OECD

Influential think-tank, the Organisation for Economic Co-operation and Development (OECD), has raised its worldwide growth forecasts in its twice-yearly report.

The Paris-based Organisation said the global economy is recovering faster than expected with Asia continuing to drive the expansion.

However, debt crises in many countries may threaten expansion in the developed world, the OECD warned.

Furthermore, there is a risk of overheating in the Chinese economy – many economists have already raised concerns that China’s economy is overheating after last month, figures revealed that the economy expanded at an annualised rate of 11.9% in the first three months of the year.

Despite the strong growth, there are fears that the world’s third largest economy is expanding too quickly.

Meanwhile, the OECD raised its forecast for global growth to 4.6% this year and 4.5% in 2011. This is higher than its predicted growth last November of 3.4% in 2010 and 3.7% in 2011.

It has also lifted its forecast for the US (the world’s largest economy) with growth of 3.2% in 2010, rather than the 2.5% predicted six months ago.

Japan, which is the world’s no.2 economy, is predicted to grow 3% rather than the 1.8% previously forecast.

Meanwhile, the euro zone, which is in the midst of a debt crisis triggered by Greece, is expected to expand 1.2% compared with the previous forecast of 0.9%.

The OECD was also positive about global employment prospects, suggesting unemployment in its 30 member countries may have peaked at around 8.5% – far less than its previous forecast of almost 10%.

However, the challenge remains bringing deficits down which involves tough austerity measures. The OECD highlights that these are crucial but could hamper growth.

Finally, the think tank recommends that the UK raise interest rates “no later than the last quarter of 2010” in order to bring down inflation, which at 3.7%, is well above the 2% target.

The OECD predicted that UK GDP would expand by 1.3% this year.

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