Published : 2014-05-06 21:02
Updated : 2014-05-06 21:02
PARIS (AFP) -- Setbacks for emerging markets and rising risks of fallout from the Ukraine crisis are holding back the global economic recovery, the OECD said on Tuesday.
The global economy is now set to grow by 3.4 percent this year, it forecast, trimming its outlook by 0.2 points.
The organisation held its forecast that the world economy would grow by 3.9 percent next year.
Central banks, including the European Central Bank, must go on shoring up growth, the Organisation for Economic Cooperation and Development said.
And governments should beware of pushing too fast to straighten out their finances.
"The near-term outlook is for global activity and world trade to strengthen gradually through the rest of this year and 2015," it said in its semi-annual Economic Outlook report.
"However, still-high unemployment in many countries and the subdued pace of growth in many emerging market economies relative to past norms are likely to limit the momentum of the recovery," said the OECD.
Although the eurozone has perked up, the OECD trimmed its forecasts for US growth after a bitter winter. Higher taxes in Japan and tighter credit conditions in China were also slowing growth.
Despite an improving overall economic outlook, the OECD said that the balance of risks to the global economy were still on the downside.
The head of economic research at the OECD, Christian Kastrop, commented that the "real problem area for the outlook is high unemployment" in various parts of the world, although the job situation in the United States was much better.
The eurozone was "lagging" behind in terms of recovery and the OECD was recommending that the European Central Bank should reduce its key interest rate from 0.25 percent to zero and a possible "switch to a nominal negative rate" for overnight deposits with it.
Addressing widespread concern that inflation has fallen too low in the eurozone, he said that "we do not see an emerging deflationary spiral" and did not think the ECB needed to enact unconventional stimulus measures now."
But Kastrop said that credit was expanding "hugely" in emerging markets and had to be watched "very carefully", adding that in China shadow banking products "already count for close to 40 percent of GDP (output) in 2013.)