OECD lowers growth prospects for major economies

| September 8, 2011 | 0 Comments

The Paris-based Organisation for Economic Cooperation and Development (OECD) has revised its growth forecasts for major economies.

The US, which is the world’s largest economy, is expected to see growth in the third quarter of 1.1% and 0.4% in the fourth – this is far lower than the previous estimates of 2.9% and 3%.

However, an unexpected sharp downgrade comes for the euro zone’s powerhouse, Germany, which is expected to contract.

The economy, which is the euro zone’s largest, is expected to contract by 1.4% in the fourth quarter on an annual basis.

Germany has been driving the recovery of the euro zone but a recent slew of weak data has forced many to re-evaluate its assessment of the economy.

Statistics office Destatis today revealed German exports fell more than expected in July.

According to Destatis, exports fell by 1.8% in July on a monthly basis compared with a 1.2% drop in June. Economists had forecast a 0.1% fall for the month.

The sharp fall in exports will be of grave concern for the country’s Government. Export demand helped to bring Germany out of recession in the second quarter of 2009 – much sooner than many of its counterparts throughout the world.

Meanwhile, the Organisation also expects debt-laden Italy to contract.

It also said the euro zone’s debt crisis could worsen at any time and is suggesting the region needs to strengthen its banks’ capital due to their exposure of fiscally distressed euro-area countries.

The OECD is calling on central banks to respond to key issues, as well as the slowdown. It said: “Policy rates in most OECD countries should be kept on hold. If in the coming months signs emerge of the weakness enduring or the economy risking to relapse in recession, rates should be lowered where there is scope.”

Meanwhile, for the UK economy, the OECD expects growth of 0.4% in the third quarter.

Finally, Japan, which is the world’s third largest economy, could see growth of 4.1% in quarter three but will see zero growth in the final quarter.

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