OECD cuts global economic growth forecasts for 2013 and 2014

The Organization for Economic Co-operation and Development (OECD) has cut global growth forecasts for 2013 and 2014 after weak prospects in emerging markets.

Global GDP for 2013 is now expected to grow by 2.7%, down from 3.1% forecast in May.

However, the OECD said global economic growth would speed up by 2015.

The OECD also revised down its global growth forecast for 2014, which it now estimates at 3.6%. In May, it had forecast 4%.

In a first estimate for 2015, it predicts growth of 3.9%.

The OECD said “weakness” in the banking system was a “major drag” on growth in the euro area.

The “potentially catastrophic crisis” over the debt ceiling in the US and “strong” market reaction to its suggestion of tapering had also unsettled confidence, it said.

OECD chief economist Pier Carlo Padoan said: “Brinkmanship over fiscal policy in the United States remains a key risk and uncertainty.”

Carlo Padoan said hitting the debt ceiling could “knock the US and the global recovery off course”.

He called for monetary policy in the US to “remain accommodative for some time”.

The global economy would act as an “amplifier” for negative shocks from a “stronger slowdown” in emerging markets, Carlo Padoan said.

He cited population trends in emerging economies, and the narrowing gap with advanced economies, as behind the “fragility”.

“Downside risks dominate and policy must address them,” he said.

Carlo Padoan said high levels of public debt in Japan created risks, but commended its export growth, rising consumer spending and rebound in business investment.

He warned governments about the risks of complacency as recovery gained momentum.

“Policy inaction or mistakes could have much more severe consequences than the turbulence seen to date and jeopardize growth for years to come.”