The global economy is expected to make a hesitant and uneven recovery over the coming two years, according to a forecast published Tuesday by the Organization for Economic Co-operation and Development (OECD).
The OECD's latest Economic Outlook concludes that decisive policy action is needed to ensure that stalemate over fiscal policy in the United States and continuing euro area instability do not plunge the world back into recession. The OECD is a think tank devoted to promoting economic development among its 34-nation member nations, which include most of the countries of Europe and North America.
GDP growth across the OECD is projected to match this year’s 1.4 percent in 2013, before gathering momentum to 2.3 percent for 2014, according to the Outlook.
In the United States, provided the “fiscal cliff” is avoided, GDP growth is projected at 2 percent in 2013 before rising to 2.8 percent in 2014. In Japan, GDP is expected to expand by 0.7 percent in 2013 and 0.8 percent in 2014. The euro area will remain in recession until early 2013, leading to a mild contraction in GDP of 0.1 percent next year, before growth picks up to 1.3 percent 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 percent in 2013 and 8.9 percent in 2014, while GDP is also expected to gather steam in the coming years in Brazil, India, Indonesia, Russia and South Africa.
Labour 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.
More needs to be done to tackle negative links in the euro area between public finances, bank solvency and risks that any country may have to leave the euro. In the long run, this requires a fully-fledged banking union with fiscal backstops. Recapitalization of banks should be undertaken where necessary.
The Outlook suggests a possible positive scenario could arise if decisive policy actions are taken to improve business and consumer confidence, and to boost growth and jobs worldwide. The rapid and broad implementation of structural reforms, not least in labor and product markets, is key to this scenario.