OECD cuts growth forecasts for industrialised world

The global economic recovery is losing momentum as the US economy has nearly stalled while growth in emerging countries is also moderating, the Organisation for Economic Co-operation and Development (OECD) said. In its twice-yearly report, the Paris-based agency said that several factors suggested that its outlook might be downgraded further, citing among others global currency tensions and a possible debt crisis in Europe. The OECD, in its latest economic outlook, said it now expects GDP across its member nations to expand by 2.3% in 2011 and 2.8% in 2012. Earlier this year, the OECD forecast 2011 growth of 2.8%.



US GDP is now forecast to grow by 2.2% in 2011 and 3.1% in 2012, compared to an earlier forecast of 3.2% growth in 2011. The 16-nation euro zone is expected to see 2011 growth of 1.7% versus an earlier forecast of 1.8%, followed by growth of 2% in 2012. Japan is expected to expand by 1.7% in 2011, versus a previous forecast of 2%. Japanese GDP is projected to expand 1.3% in 2012.

China's economy will continue to expand as domestic consumption offsets more moderate export growth, but inflation and the potential for non-performing loans in the property sector are risks to the outlook, the OECD said. China's economy in 2011 and 2012 will maintain a stable growth rate of 9.7%, lower than this year's estimated 10.5%, according to OECD.

South Korea's economy is predicted to grow 4.3% in 2011 and 4.8% in 2012 as increased competitiveness sustains export growth and falling unemployment underpins domestic demand, the OECD said. A strong labour market and high capacity utilisation will put upward pressure on inflation. So, the Bank of Korea should normalise interest rates, the report said.

Japan's economy will grow 1.7% in 2011 but slow to 1.3% in 2012 as exports moderate, the OECD predicted. This would not be quick enough to bring an end to persistent deflation, so the Bank of Japan should implement more quantitative easing measures until prices rise significantly, the OECD said.

Australia's economy should grow briskly in the next couple of years as Asian demand for its resources drives a mining boom, though higher interest rates will be need to contain inflation, the OECD said. Australia's GDP will grow by 3.6% next year and 4% in 2012, it said.