OECD lower 2014 global growth forecast

PARIS -- The Organization for Economic Cooperation and Development (OECD) on Tuesday said they expect moderate global growth in the coming two years but added negative stocks of emerging economies would hamper the world's recovery.

In its new report, the OECD lowered 2014 global growth by 0.5 point percentage to 3.6 percent next year "due to weaker prospects in many emerging market economies (EMEs)," prompted by "abundant capital inflows and credit growth."

"Contrary to the situation in the early phases of the recovery when stimulus in EMEs had positive spillovers on growth in advanced economies, the global environment may now act as an amplifier and a transmission mechanism for negative shocks from EMEs," said Pier Carlo Padoan, OECD deputy secretary-general and chief economist.

The OECD report showed a strengthening recovery in the United States, that would help reducing unemployment, with a projection of growth of 1.7 percent this year and 2.9 percent in 2014.

Noting the risk and uncertainty over the country's brinkmanship over fiscal policy, the OECD recommended maintaining an accommodative monetary and then raising policy interest rates towards a more neutral stance when the world's largest economy witnesses strong growth.

In Japan, domestic demand and export growth will help Tokyo to report 1.5 percent growth next year and one percent in 2015.

As for the euro area outlook, the Paris-based organization sees a lagging recovery handicapped by high joblessness mainly among young people. Its three top economies: Germany, France and Italy could show a strengthened economic performance with a growth rate of up to 1.7 percent in 2014.

"Economic policies need to provide support to demand, take account of the sizeable downside risks and correct past imbalances. Monetary policy will need to remain accommodative in most OECD economies over the next two years," said Padoan.

The OECD expected the Dutch economy to remain weak and to shrink by 0.1 percent in 2014, while in May a growth of 0.7 percent was expected. The OECD expects the Dutch economy to slowly recover in 2015 by projecting a growth of 0.9 per cent.

According to the organization, unemployment in the Netherlands will continue to rise to a peak of 8.1 percent in 2015.

The risks to the Dutch economy remain high, according to the OECD. "Declining real house prices, falling real incomes and growing unemployment are holding back household consumption while overstretched balance sheets of banks and heightened risk have led to tight credit conditions," the report stated.

The OECD forecast is more pessimistic than recent forecasts published by the Netherlands Bureau for Economic Policy Analysis (CPB) that expected a growth of 0.5 per cent in 2014.