OECD Lowers Global Economic Growth Forecast

The Organization for Economic Co-operation and Development (OECD) has significantly revised down its projections for global economic growth in 2013 and 2014, indicating a deteriorating outlook for emerging markets.

In its biannual economic outlook report, the OECD stated that growth is expected to slow in several emerging markets and raised concerns about the potential risks to financial stability posed by the Federal Reserve possibly reducing its asset purchase program.

The OECD now anticipates that the global economy will grow by 2.7% this year and 3.6% in 2014, a decrease from previous forecasts of 3.1% and 4% provided in May.

The organization mentioned that while the global economy continues to expand at a moderate pace, with some acceleration expected in 2014 and 2015, the outlook has been downgraded largely due to weakened projections in numerous emerging market economies.

For the eurozone, the OECD has lowered its growth forecast to 1% for 2014, down from the prior estimate of 1.1%. However, it improved its 2013 forecast from a contraction of 0.6% to a contraction of 0.4%. The OECD pointed out that weaknesses within the eurozone banking system are a significant impediment to growth and warned of an escalating risk of deflation in the region.

The forecast for the United Kingdom has been notably raised, with expectations for 2.4% growth in 2014, an increase from May’s projection of 1.5%.

In the United States, the economy is projected to grow by 2.9% next year, though the OECD cautioned that the ongoing “potentially catastrophic crisis” regarding the debt ceiling has eroded investor confidence.

The outlook for the combined economies of the OECD’s 34 member countries remains unchanged, with projected growth of 1.2% this year and 2.3% in 2014.