Roundup: OECD cuts global growth outlook on emerging markets' slowdown

The Organization for Economic Cooperation and Development (OECD) foresaw Wednesday "weakened" growth outlook in the near term as "stagnating world trade and deteriorating conditions in financial market" halt growth in emerging markets and tainted performance of advanced economies.

"Global growth prospects have weakened slightly and the outlook is clouded by important uncertainties," said OECD Chief Economist Catherine L. Mann.

"Emerging economies have vulnerabilities that could be exposed by rising U.S. interest rates and/or a sharper-than-expected slowdown in China, giving rise to financial and economic turbulence that could also exert a significant drag on advanced economies," she added.

According to the latest Economic Outlook released by the Paris-based organization, the world economy would grow by 3 percent this year and 3.6 percent in 2016, down from 3.1 percent and 3.8 percent from a previous projection.

The U.S. economy is expected to expand 2.4 percent in 2015 before rising to 2.6 percent a year after as "rising employment and household consumption are driving solid growth in the United States, but investment continues to disappoint," the think-tank said, calling on the country's central bank to raise its benchmark rates, the first increase since 2008 financial crisis.

"The U.S. Federal Reserve will soon need to begin to raise its policy rate at a gradual pace, given the solid growth of the U.S. economy and concerns over asset prices. The timing of the first rate rise will make little difference to the outcome, but the pace of increase does matter," the OECD said.

Growth across the eurozone was projected at 1.6 percent this year and 1.9 percent next year as Germany was leading expectations of growth. Its economy was set at 1.6 percent in 2015, unchanged from previous estimate.

As for France, which is struggling to put growth on recovery track, will see a 1 percent rise for the whole year of 2015 followed by a 1.4 percent rebound in the next year, below the government target percent.

However, "the pace of recovery in the euro area is disappointing, given the favorable factors from which they are benefiting," according to Mann.

The OECD expert urged more growth-oriented fiscal policies and repairing banking system across the European bloc in order "to add momentum to the expansion and create spillover effects into labor markets, business investment and trade".

Looking to China, the Paris-based organization projected 6.7 percent growth in 2015 and 6.5 percent in 2016, down by one percentage point and two percentage points respectively.

"The marked slowdown in Chinese import demand has important spillover effects on global growth, particularly in emerging economies with close trade links to China, and those that depend on commodities," it noted.

In Brazil, growth would contract by 2.8 percent in 2015 and then by an additional 0.7 percent rate in 2016.

"With an eye toward towards the medium term, ambitious structural policies are needed in advanced and emerging countries alike, to encourage investment and reverse the slowdown in the growth potential output, which represents the wherewithal to make good on promises to the young, the old, and investors alike," Mann said. Endit