OECD Urges More Action from Central Banks to Avert Another Global Contraction

November 27, 2012 7:57 AM EST
News out of the Organisation for Economic Co-operation and Development (OECD) paints a rather bleak outlook for economic recovery over the next two years.

The OECD says that, unless euro-zone and U.S. lawmakers act, the global economy would enter another fresh contraction. In addition, the Paris, France-based firm said Japan, China, and India would need to provide more stimulus in order to keep those economies firm.

Central banks were also hinted at cutting key rates and proving additional quantitative easing.

The twice-per-year warning was the most drastic since the end of 2008, when the globe was swamped with a massive financial crisis.

From the release:

"GDP growth across the OECD is projected to match this year’s 1.4% in 2013, before gathering momentum to 2.3% for 2014, according to the Outlook.

"In the United States, provided the "fiscal cliff" is avoided, GDP growth is projected at 2% in 2013 before rising to 2.8% in 2014. In Japan, GDP is expected to expand by 0.7% in 2013 and 0.8% in 2014. The euro area will remain in recession until early 2013, leading to a mild contraction in GDP of 0.1% next year, before growth picks up to 1.3% in 2014.

"After softer-than-expected activity during 2012, growth has begun picking up in the emerging-market economies, with increasingly supportive monetary and fiscal policies offsetting the drag exerted by weak external demand. China is expected to grow at 8.5% in 2013 and 8.9% in 2014, while GDP is also expected to gather steam in the coming years in Brazil, India, Indonesia, Russia and South Africa.

"Labor markets remain weak, with around 50 million jobless people in the OECD area, the Outlook said. Unemployment is set to remain high, or even rise further, in many countries unless structural measures are used to boost near-term employment growth.

"The euro area crisis remains a serious threat to the world economy, despite recent measures that have dampened near-term pressures. Adjustment of deep-rooted imbalances across the euro area has begun, but much more is needed to ensure long-term sustainability, including structural reform in both deficit and surplus countries."

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