Advanced economies growing, emerging markets slowing – OECD
A moderate recovery is underway in the major advanced economies, according to The Organisation for Economic Cooperation and Development (OECD)’s latest Interim Economic Assessment.
Growth is proceeding at encouraging rates in North America, Japan and the UK and the euro area as a whole is out of recession, the OECD’s latest report said.
However, growth has slowed in some of the large emerging economies according to the report.
As the OECD also highlighted, one factor has been a rise in global bond yields – triggered in part by an expected scaling back of the US Federal Reserve’s quantitative easing – which has fuelled market instability and capital outflows in a number of major emerging economies, such as India and Indonesia.
“Since they now account for a large share of the world economy, the slowdown in the emerging economies points to sluggish near-term growth globally, despite the pick-up in the advanced economies,” the report also read.
Presenting the assessment in Paris, OECD deputy Chief Economist Jorgen Elmeskov said: “The gradual pick-up in momentum in the advanced economies is encouraging but a sustainable recovery is not yet firmly established. Major risks remain. The euro area is still vulnerable to renewed financial markets, banking and sovereign debt tensions.
“High levels of debt in some emerging markets have increased their vulnerability to financial shocks. And a renewal of brinkmanship over fiscal policy in the US could weaken confidence and trigger new episodes of financial turmoil. “
He added: “Continued support for demand is still needed to make sure recovery takes hold, and it remains vital that this be complemented by structural reforms to boost growth, rebalance the global economy and avoid a ratcheting-up of structural unemployment.”
The Interim Economic Assessment said public finances have been improving in most advanced economies, with the exception of Japan, but that fiscal consolidation policies must continue. Such policies need to be better designed, however, to protect the most vulnerable in society, to build public support for necessary structural reforms and to prioritise spending to help get people back to work.