Outlook thawing for mature markets, slows for developing world: OECD

03 September 2013 13:34 Source:ICIS News

LONDON (ICIS)--Growth is gradually returning to mature economies across the globe, despite persistent weak output in parts of the eurozone, but is slowing in emerging economies, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.

The group described growth rates for North America, the UK and Japan as “encouraging”, and noted that the eurozone had emerged from recession, despite prevailing economic doldrums in some of its constituent countries.

Momentum for developing world economies has started to slow, the OECD said, driven in part by a rise in global bond yields leading to market instability and increased outflows of capital from key emerging markets.

A significant driver behind the increase in treasury prices is the expectation that the US Federal Reserve will begin to scale back its quantitative easing programme in the near future, meaning that foreign investment levels from the US are likely to fall in the future.

OECD deputy chief economist Jorgen Elmeskov said: “The gradual pick-up in momentum in the advanced economies is encouraging but a sustainable recovery is not yet firmly established. Major risks remain. The euro area is still vulnerable to renewed financial markets, banking and sovereign debt tensions.

“High levels of debt in some emerging markets have increased their vulnerability to financial shocks. And a renewal of brinksmanship over fiscal policy in the US could weaken confidence and trigger new episodes of financial turmoil,” he added.

The OECD predicts that North America, Japan and the UK will generate GDP expansions of 1.7%, 1.6% and 1.5% respectively in 2013, a significant increase from its previous forecast for the UK GDP. Canadian GDP is predicted to expand by 2% during the year.

Of the largest eurozone economies, the OECD is predicting that German GDP will grow by 0.7% in 2013, while France is expected to grow by 0.3%. The Italian economy continues to struggle, and is expected to contract by 1.8% this year.

The slowdown in China is expected to continue this year, with GDP growth of 7.4% predicted by the OECD compared with 7.8% last year.

By Tom Brown