The OECD today slashed its global growth forecast for 2012. In its biannual Economic Outlook, the OECD says that the Eurozone has entered a mild recession and the US is at risk of following suit. Prospects will only improve if decisive action is taken quickly,” said OECD Chief Economist Pier Carlo Padoan.
The OECD adds that the euro area crisis remains the key risk to the world economy. Concerns about sovereign debt sustainability are becoming increasingly widespread. If not addressed, recent contagion to countries thought to have relatively solid public finances could massively escalate economic disruption.
The OECD's baseline scenario assumes that policy-makers take sufficient action to avoid disorderly sovereign defaults, a sharp credit contraction, systemic bank failures and excessive fiscal tightening.
The OECD cut its 2012 global growth forecast to 3.4% from its previous forecast of 4.6% in May, and cut its 2011 forecast to 3.8% from 4.2%. It cut its Eurozone growth forecast 90% to 0.2% from 2%, but expects US growth to rise to 1.7% in 2011 to 2% in 2012 - provided that action is taken to offset the large degree of fiscal tightening implied by current law. Otherwise, the US could tip into a recession that monetary policy could do little to counter. China's growth rate is projected to slow to 8.5% in 2012 from 9.3% this year.
Published by Globes [online], Israel business news - www.globes-online.com - on November 28, 2011
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