OECD: World Economy Improved, But Risks Remain

PARIS: The economies of both developed and emerging market countries have performed much better than expected over the last six months, and the outlook over the coming year has "improved substantially," the Organisation for Economic Co-operation and Development (OECD) says in its most recent global economic forecast. However, global growth could be jeopardized if the U.S. economy comes in for a "hard landing" amid rising inflation and a sinking stock market, the OECD says. Growth in the 29 OECD-area countries should average about 3% this year and next. Area-wide inflation will likely edge up, though remain below 2% over the next two years. Overall unemployment should edge down, with major job creation occurring in the European Union, resulting in a decline in unemployment of around 2.5 million between 1998 and 2001. The OECD's new set of projections suggests that, for the first time in years, output levels in all the major OECD regions might be moving toward their respective potential. However, the OECD cautioned that several downside risks remain, especially in financial markets. Japan in particular could see growth stymied if the yen undergoes "further pronounced ... appreciation." Additional increases in long-term interest rates also could weaken the recovery process both in Japan and in the euro area, the OECD said.