OECD Sees Slower Growth in U.S., Europe, Japan

April 7, 2010
U.S. projected to grow 2.4% in Q1 and 2.3% in Q2

Economic growth is likely to slow in advanced nations in the first half of this year and governments should wait until 2011 to withdraw stimulus and curb deficit spending, the OECD said on April 7.

The Organization for Economic Cooperation and Development forecast that the U.S. economy in the first half would nonetheless grow faster than that of Japan, Germany -- where growth would likely be negative in the first quarter -- and France. But it found that Britain would likely stand out as an exception to the slowing trend.

After expanding 5.6% in fourth quarter 2009, the U.S. economy is projected to grow 2.4% in the first quarter this year and 2.3% in the second.

Germany, the eurozone's biggest economy, would suffer a 0.4% contraction in the first quarter before rebounding with growth of 2.8% in the second. German momentum was flat in the final three months of 2009.

In France growth would slow from 2.4% in third quarter 2009 to 2.3% in the first quarter and 1.7% in the second. The Japanese economy was projected to expand 1.1% in the first quarter and 2.3% in the second after 3.8% in fourth quarter 2009.

Bucking the trend among developed countries was Britain, where growth was forecast by the OECD to rise to 2% in the first quarter and 3.1% in the second after 1.8% in the final three months of 2009.

The OECD report coincided with an estimate from the European Union's statistics office Eurostat saying that growth in eurozone ground to a halt in the fourth quarter of 2009.

Growth in the 16 eurozone nations stagnated at 0.0% in the final three months of last year, compared to 0.4% in the third quarter, Eurostat said.

The OECD warned that the recovery in the Group of Seven countries remained vulnerable to the withdrawal of official economic stimulus measures, inventory drawdowns, sluggish credit growth and unemployment.

"Although we are seeing some encouraging signs of stronger activity, the fragility of the recovery, a frail labor market and possible headwinds coming from financial markets underscore the need for caution in the removal of policy support," OECD chief economist Pier Carlo Padoan said in the organisation's Interim Economic Assessment.

The OECD maintained that a sharp rise in government debt accumulated during the financial crisis now called for spending reductions in many countries.

But it cautioned: "Consolidation should start in 2011, or earlier where needed, and progress gradually so as not to undermine the incipient recovery."

Copyright Agence France-Presse, 2010

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