G7 growth rising but eurozone uneven, says OECD

28 Mar 13
The global economy is beginning to pick up, but the ongoing crisis in the eurozone remains a barrier to recovery in Europe, the Organisation for Economic Co-operation and Development said today.

By Vivienne Russell | 28 March 2013

The global economy is beginning to pick up, but the ongoing crisis in the eurozone remains a barrier to recovery in Europe, the Organisation for Economic Co-operation and Development said today.

Presenting the OECD’s latest Interim economic assessment in Paris, chief economist Pier Carlo Padoan predicted growth for the Group of Seven leading economies as a whole would be 2.4% for the first quarter of the year and 1.8% for the second. The G7 countries are the US, UK, France, Germany, Italy, Canada, and Japan.

The picture was less encouraging for the G7 eurozone economies. The three largest – Germany, France and Italy – are, taken together, forecast to grow by 0.4% in the first quarter and 1.4% in the second.

However, this conceals a relatively strong performance from the German economy and increasing divergence between its growth rate and that of its eurozone peers.

Its growth is expected to be 2.3% in the first quarter and 2.6% in the second, compared with forecast contractions in France and Italy.

‘The global economy weakened in late 2012 but the outlook is now improving for OECD economies,’ said Padoan.

‘Bold policy action remains necessary to ensure a more sustainable recovery, particularly in the euro area, where growth is uneven and remains slower than in other regions.’

In the US, the economy is expected to rebound by 3.5% in the first quarter, the OECD said, before returning to more moderate growth of 2% in the second quarter. Canada is set to grow by 1.1% in the first quarter and 1.9% in the second and Japan by 3.2% and 2.2% respectively. In the UK, growth of just 0.5% is expected in the first quarter and 1.4% in the second.

Padoan added that monetary stimulus remained necessary but that needs varied between countries.

‘In the US, the commitment of the Federal Reserve to keep policy rates low until labour market outcomes improve substantially is well judged, but the need for further exceptional monetary measures is waning, while in Japan more aggressive policy action is required to escape deflation and achieve the Bank of Japan’s new 2% inflation target,’ he said.

‘In the euro area, there is still some scope to ease monetary policy further, given weak demand and inflation well below the European Central Bank’s objective.’


Did you enjoy this article?

Related articles

Have your say

Newsletter

CIPFA latest

Popular

Most commented

Events & webinars