U.S. Growth Will be Fastest of G-7: OECD
For Personal Use Only
The Organization for Economic Cooperation and Development on Tuesday lowered its forecast for economic growth in the major European economies and Japan and raised its expectations for the United States, which it predicted will grow at the fastest pace of all G-7 economies, reported the Associated Press.
The Paris-based international agency said tax cuts in the U.S., combined with strong exports, caused it to revise its expectation for economic growth to 1.8 percent this year, faster than the 1.2 percent forecast in June.
Japan will grow by just 1.2 percent, down from June’s 1.7 percent forecast, the OECD said, predicting the country will avoid recession with a partial bounce-back in the second half.
The 15-nation euro zone is set to grow at a 1.3 percent clip, compared with 1.7 percent forecast in June. Major economies Germany, France and Italy, which like Japan all shrank in the second quarter, should also avoid recession defined as two consecutive quarters of negative growth, according to the center point of the projections.
The British economy, which is expected to chart 1.2 percent growth this year, could be entering a recession with growth expected to shrink in the third and fourth quarters, the OECD’s central projections show.
The Fed’s 2 percent rate is justified so long as economic slack contains inflation, he said. Meanwhile, the ECB should keep its benchmark rate at 4.25 percent to counter price pressures, and the Bank of Japan is advised to buffer against the risk of deflation, keeping its key rate at 0.5 percent.
Continued turmoil reflects signs of weakness in the global economy, and the eventual depth and extent of financial disruption is still uncertain, the OECD said.
Filed by Ozlem Yucel under Global Financial Crises