WASHINGTON – The economies of the United States and countries in the European Union will recover only if leaders can commit to long-term and decisive policies sooner rather than later, according to the most-recent economic outlook report by the OECD.
The Organisation for Economic Co-operation and Development released its forecast for global growth in Paris on Tuesday morning and called prospects for global recovery “hesitant and uneven.” The weak outlook is largely due to a drop in confidence related the lack of concrete monetary policy, experts said.
The report estimates that GDP growth in the U.S. will dip to 2 percent next year, down from expected growth of 2.2 percent this year, before climbing to 2.8 percent in 2014.
The biggest downside risks for global growth are continued volatility in the euro zone and austerity in the U.S. if the fiscal cliff is not resolved. “The U.S. ‘fiscal cliff’, if it materialises, could tip an already weak economy into recession, while failure to solve the euro area crisis could lead to a major financial shock and global downturn,” said OECD Secretary-General Angel Gurría.
According to the report, European economies remains locked in crises thanks to three main concerns, bank insolvency, the dissembling of the Eurozone and government debt.
Total growth within OECD countries will be flat at 1.4 percent for 2012 and 2013 before growing to 2.3 percent in 2014 according to the report. The Eurozone will remain in a recession until the start of 2014.
With high unemployment, which stands at about 50 million in the OECD area, and increasing borrowing costs in some countries including Greece, Portugal, Spain and Italy, leaders need to take a strong stance when it comes to implementing monetary policy said OECD Deputy Secretary-General and Chief Economist Pier Carlo Padoan.
“Higher borrowing costs are a symptom of the wider need to restore confidence. Progress toward a full fledged banking union must be accelerated,” said Padoan. “The deeper policy challenge facing governments is to guide the global economy onto a new, stronger long-term path.”
According to economists recovery projections are largely dependent on the ability of political leaders to implement decisive policies when it comes to reducing unemployment and consolidating debt across the globe.
Though moderate growth is expected by 2014, “The world economy is far from being out of the woods,” said Gurría