‘EU can do more to catch up to US, Japan’

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br oecd Bloomberg Pier Carlo Padoan, chief economist with the Organization for Economic Cooperation and Development (OECD), attends the opening reception of the Federal Reserve Bank of Kansas City annual symposium near Jackson Hole, Wyoming, U.S., on Thursday, Aug. 26, 2010. Fed Reserve Chairman Ben S. Bernanke will discuss the outlook for the economy on Aug. 27 at the annual conference. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Pier Carlo Padoan

Mark Deen Paris

The Organisation for Economic Co-operation and Development (OECD) forecasts global economic growth will accelerate next year, with both the US and Japan continuing to outpace the euro zone.

“The global economy is moving forward and it is doing so at multiple speeds,” the organisation’s chief economist, Pier Carlo Padoan, said yesterday in the bi-annual OECD Economic Outlook. Differing monetary and fiscal choices across the major developed economies were driving regional divergence with “each path carrying its own mix of risks”, he said.

Central banks are still seeking to bolster their economies, with the US Federal Reserve buying $85 billion (R823bn) of debt a month and the Bank of Japan unveiling unprecedented stimulus last month. In the euro zone, where the European Central Bank cut rates to a record low this month, the OECD said “more can be done through non-conventional measures”.

The OECD sees US gross domestic product rising 1.9 percent this year and 2.8 percent in 2014, while Japan’s will slow from 1.6 percent to 1.4 percent. Euro zone output will shrink 0.6 percent this year before expanding 1.1 percent next year, according to the report.

Still, Padoan warned of risks in the 17 nations using the euro, saying rising unemployment was the “most pressing challenge” and that countries with trade surpluses needed to allow wages to rise.

German unemployment rose more than economists forecast this month as the euro zone debt crisis and a long winter took their toll. Data released yesterday showed the number of people out of work rose by 21 000 to 2.96 million, against predictions of a rise of 5 000.

The euro zone’s 12.1 percent unemployment rate “is likely to continue to rise further… stabilising at a very high level only in 2014”, the OECD said.

And Padoan warned: “Reform fatigue is mounting as visible results in growth and jobs fail to materialise.”

But OECD secretary-general Angel Gurría said the tough reforms would soon bear fruit.

The OECD, which advises its 34 developed market members on economic policy, sounded more optimistic on systemic issues than in recent reports. It praised the US for having “repaired” its financial system, welcomed Japan’s shift to a more stimulative monetary policy and noted that public debt in many euro area nations would soon start to decline given fiscal efforts made over “several years”.

Combined growth across the OECD will accelerate to 2.3 percent next year from 1.2 percent this year, according to the report. China, which is not a member, should expand 8.4 percent next year after 7.8 percent growth this year. – Bloomberg and Sapa-AP


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