The OECD's forecast confirms a US economic slowdown but stops short of calling it a recession while the Eurozone shows signs of resisting, it says.
The OECD slashed
The US economy was now expected to grow 0.1 percent in the first quarter, a sharp reduction from the 0.3 percent estimated in December, and to show zero growth in the second, a sudden halt compared with 0.4 percent given previously.
Despite the sharp downward revision, acting chief OECD economist Jorgen Elmeskov said in a statement "it may be premature to declare a recession" in the
The OECD interim assessment report said the eurozone economy would grow 0.5 percent in the first quarter, up from 0.4 percent, but slip to 0.4 percent in the second, down from 0.5 percent.
But the estimate showed the British economy doing better than expected in the first quarter, growing by 0.6 percent from a previous estimate of 0.4 percent, although the second-quarter estimate of 0.6 percent was unchanged.
The overall tone of the OECD's assessment was one of concern about the slowdown in the
"The US economy is going to be very weak" over the first two quarters, Elmeskov told a press conference later, but Europe "will be in nowhere near the same camp as the US."
For 2008, the
On the same basis, Eurozone growth would be unchanged at 1.5 percent and
Elmeskov said that the global economy faced major headwinds, with a growing level of distrust in the financial markets, as reflected in the credit crunch, feeding through into the real economy as funding costs rose.
At the same time, rising food, energy and raw material costs were stoking inflation, making it more difficult for central banks facing a choice between cutting interest rates to spur growth and keeping them high to curb prices.
"Headling inflation is being boosted everywhere," Elmeskov said, noting that if people began to expect further price hikes, "it could be very costly; (there are) some yellow (warning) lights flashing."
Whilst saying current
Despite these headwinds, Elmeskov said there were no signs yet of a slowdown outside the OECD countries but there "must be limits as to how long" this can continue and whether the non-OECD could really decouple from OECD.
The OECD, a multilateral government research body, said its latest estimates reflected a sharp downturn in US economic conditions since December, with financial markets in turmoil, evidence of employment weakness, plunging confidence and further declines in the housing market.
The report praised action by the Federal Reserve and
"In the euro area ... the near-term outlook for activity and inflation does not point to a need for stimulus and automatic fiscal stabilisers will provide more support than in other regions," said Elmeskov in the statement.
Automatic stabilisers are such levers as unemployment benefits which automatically stimulate the economy as the cycle turns downwards.
In December, when the OECD published its last forecasts, it said the
The OECD groups the governments of 30 mostly developed democratic countries, including the three powers of North America, most of Europe and Asian Pacific members
Date created : 2008-03-21