The Organization for Economic Cooperation and Development on Sept. 2 increased its forecast for growth in the U.S. economy this year but slashed its predictions for Japan and the eurozone.
The OECD, grouping of 30 developed countries, said growth in the U.S. economy would be 1.8% this year compared to 2007, a sharp upwards revision from a prediction in June of 1.2%.
Growth in the Japanese economy would be 1.2% instead of 1.7% and the eurozone would expand by 1.3% instead of 1.7%, the organization said in an interim assessment of leading OECD countries.
The combined economy of Group of Seven nations, the world's leading industrialized democracies, was forecast to grow by 1.4%, unchanged from the last analysis by the OECD in June.
The revision to the 2008 U.S. figure was mainly due to unexpectedly strong data for the second quarter of the year, the OECD explained.
Growth in April-June figure was revised up by the U.S. government last week to 3.3% over 12 months instead of 1.9% as announced initially. In the third and fourth quarters, the U.S. economy, the world's biggest, is forecast to growth 0.9% and 0.7% on a 12-month basis but these forecasts contain "great uncertainty." The OECD does not exclude the possibility of a U.S. recession but "we do not have projections for negative growth in the next quarters," Jean-Louis Schneider, deputy director of the OECD economics department, added.
In Europe, the downward revision is also due to second quarter figures, which, unlike the U.S., surprised on the downside, Schneider explained. The eurozone economy contracted 0.2% in the second quarter compared with the first, according to official data.
However, Britain will fare worst, falling into recession over the second half of 2008, with the economy contracting by between 0.3% and 1.2% in the third quarter, and by between 0.4% and 1.2% in the fourth. A recession is defined technically as two consecutive quarters of negative growth. For full-year 2008, Britain's economy would post growth of only 1.2%, down from its June estimate of 1.8%, the OECD said.
Japan's economy contracted 0.6% in the three months to June from the previous quarter, official figures showed. On monetary policy, the OECD argued in favor of keeping interest rates on hold in the U.S., eurozone and Japan. "In Japan, different indicators of underlying inflation send mixed signals and deteriorating business sentiment, as well as the need for a buffer against the risk of deflation, argue for keeping monetary policy on hold," it said.
Copyright Agence France-Presse, 2008