28 Nov 2012

World economy set for sharp slowdown - OECD

11:24 am on 28 November 2012

The Organisation for Economic Cooperation is predicting the world economy will fall sharply next year.

The group has cut its growth forecast for the 34-member area and says the eurozone debt crisis and the US 'fiscal cliff' were major risks to global recovery.

The agency slashed its outlook to 1.4% growth in 2013 from its previous forecast of 2.2%.

It warned that eurozone banks still require about €400 billion of fresh capital and need to take steps towards creating a banking union to ensure economic stability.

The economies are expected to pick up to a pace of 2.3% growth in 2014.

Unemployment is forecast to rise from 8% this year to 8.2% in 2013 before easing back to 8% in 2014.

The OECD's data showed that the eurozone recession could be deeper than last forecast in May and is projected to remain in or near recession until well into 2013, AFP reports.

Another threat to business activity worldwide is a potentially catastrophic budget standoff in the United States, where automatic tax increases and spending cuts are to take effect in January unless there is a compromise solution between Democrat and Republican lawmakers.

Outside the OECD, growth in Brazil from 2012 to 2014 was put at 1.5%, 4% and 4.1%, in China at 7.5%, 8.5% and 8.9%, and in India at 4.4%, 6.5% and 7.1%.