PARIS – The outlook for economic growth in developed countries has got much worse in the last three months, the OECD said yesterday and urged central banks to keep rates low and be ready to pursue other forms of easing.
The latest estimates marked a sharp slowdown from the Paris-based organisation’s last forecast in May, but different methodology were used and thus were difficult to compare precisely.The Organisation for Economic Cooperation and Development forecast growth across the G7 group of major industrialised economies will average 1,6 per cent on an annualised basis in the third quarter before slowing to just 0,2 per cent in the final three months of the year. ‘With respect to three months back the growth scenario looks much worse, one would say that growth is stagnating,’ said OECD chief economist Pier Carlo Padoan.’We are witnessing a growth slowdown across OECD countries.’The slowdown would hit Germany particularly hard, according to the OECD’s estimates, forecasting that Europe’s biggest economy would see annualised growth of 2,6 per cent in the third quarter before contracting 1,4 per cent in the fourth.The US economy, meanwhile, would see annualised growth of 1,1 per cent in the third quarter slowing to 0,4 per cent in the fourth quarter.The OECD, which is due to provide more complete forecasts later this year, warned that its latest outlook had an abnormally high margin of error due to exceptional uncertainty.With the full impact of recent debt troubles in Europe and the United States still unknown, the OECD warned that growth could prove even weaker although it ruled out a recession on the scale of the 2008-2009 financial crisis.In light of the fast deteriorating outlook, the OECD said that central banks should keep interest rates on hold. ‘If in the coming months signs emerge of the weakness enduring or the economy risks relapsing in recession, rates should be lowered where there is scope,’ the OECD said. – Nampa-Reuters
