Developed economies are staging a comeback after years of lagging growth, but a slowdown in emerging countries will keep global growth low this year, the Organization for Economic Cooperation and Development said Tuesday. In its interim assessment, the organisation was more upbeat than it has been in recent years, as debt and financial crises in Europe and the US hammered growth.
Deputy chief economist Joergen Elmeskov said the gross domestic product of the seven leading economies, known as the G-7, has been improving since shrinking in the last quarter of 2012 and would grow at an annualised rate of about 2.5% in the second half of this year. “It’s moderate, but it’s still a better outcome than what we were used to in the recent past,’’ he said as the report was released.
The report raised its estimates for growth in the two largest economies that use the euro: It predicted Germany would grow 0.7% this year, up from May’s prediction of 0.4%. France should see 0.3% growth, as opposed to the contraction expected in May. But it lowered its forecast for the US to 1.7% from its estimate in May of 1.9%. China, the biggest of the emerging economies, was seen growing 7.4%, down from a previous forecast of 7.8%.
The organisation called on central banks to continue with the loose monetary policies that have been credited with helping economies rebound.
“Monetary policy clearly needs to remain strongly expansionary,’’ especially in Europe and Japan, said Elmeskov. He added that the US can start winding down its bond-buying plan, which has been supporting the economy by keeping interest rates down, but should do so slowly and carefully.