OECD revises growth prospects for global economy

Kay Mitchell | May 25, 2011 | 0 Comments

The Paris-based Organisation for Economic Cooperation and Development (OECD) has revised its growth forecasts for the global economy.

The US, which is the world’s largest economy, is expected to see growth this year of 2.6% - revised upwards from a previous estimate of 2.2%.

It maintained its 2012 growth forecast at 3.1%.

“Growth in the United States is expected to pick up modestly from the second quarter of 2011, supported by accommodative monetary policy and favourable financial conditions,” it said.

In terms of unemployment, the Organisation lowered its forecast for this year to 8.8% from 9.5%.

Meanwhile Japan, which is the world’s third largest economy, has recently been pushed back into a recession following the recent devastation caused by the earthquake and tsunami in March.

The economy has been thriving on the back of surging exports but the twin disasters forced some of Japan’s largest exporters to halt production.

As a result, the OECD lowered its forecast for Japan and believes the economy will contract 0.9% in 2011, rather than expand 0.8%.

For the UK, the OECD expects growth to be 1.4% in 2011, slightly less than the 1.5% forecast in March.

For the 2012 year, growth is expected to be 1.8%, down from a previous estimate of 2%.

Growth in the UK is being hampered by soaring inflation, which is having a major impact on consumer spending.

“Monetary policy should remain expansionary over the forecast period to support activity in view of the tightening fiscal stance,” the OECD said.

It expects growth for the euro zone to be in the region of 2% in 2011 and 2012. Some of the 17-member nations are struggling with large amounts of debt and several countries are being forced to slash their budget deficits.

However Germany, which is the largest euro zone economy, is thriving and growth of 3.4% is expected this year. France is expected to grow by 2.2%, but Greece and Portugal (both recipients of financial bailouts) are expected to contract this year.

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