Rebound driven by trade flows, emerging markets and stimulus policies
PARIS: Despite mounting concerns about European debt and fears that Asian economies may be overheating, the global recovery is taking root, an international research group says.
The Organisation for Economic Cooperation and Development on Wednesday raised its overall growth forecast and its outlook for the United States, the euro zone, China and Japan.
The rebound from the severe downturn that plagued the global economy for much of 2008 and last year is driven by a healthy increase in trade flows, booming emerging markets, the continued support of government stimulus policies that are now unwinding, and better market conditions, according to the organisation's twice-yearly Economic Outlook report.
'There're objective reasons to be positive about the outlook,' said the organisation's secretary-general Angel Gurria. 'World growth is picking up - it's quite better than it was even a few months ago - led by China, led by India, but also a very brisk recovery in the US, where we're seeing a pick-up in jobs.'
The organisation has 31 member countries, all advanced industrial democracies. And the group predicted that gross domestic product across the OECD area would rise 2.7 per cent this year and 2.8 per cent next year; in November, it had estimated that growth would be 1.9 per cent this year and 2.5 per cent next year.
'We're slowly moving from a policy-driven recovery to a self-sustaining recovery,' the organisation's chief economist, Mr Pier Carlo Padoan, said.
The US is in a stronger position than the euro area, he said, helped by better financial market conditions and 'a number of more favourable elements on the fiscal side' - notably the outlook for stronger tax revenue, which gives it more time than Europe to undertake debt-reduction steps.
The report forecast real GDP growth in the US of 3.2 per cent this year and next, compared with its previous forecast of 2.5 per cent this year and 2.8 per cent next year. It predicted that the American jobless rate would fall to 8.9 per cent next year, from 9.7 per cent this year.
Mr Gurria suggested that the doubts about the viability of the euro area had been excessive. Bad news 'tends to sell better than good news', he said.
Growth in the 16-country euro area was estimated at a much more modest 1.2 per cent this year and 1.8 per cent next year, but that was up from the previous forecast of 0.9 per cent this year and 1.7 per cent next year. Unemployment will remain high in the region, at 10.1 per cent next year, the report said.
NEW YORK TIMES
Source: Straits Times, 28 May 2010