الرئيسية
By Arab News
JEDDAH: Decisive policies must be urgently put in place to
stop the euro area sovereign debt crisis from spreading and to put
weakening global activity back on track, says the OECD’s latest Economic
Outlook.
The euro area crisis remains the key risk to the world
economy, the outlook says. Concerns about sovereign debt sustainability
are becoming increasingly widespread. If not addressed, recent contagion
to countries thought to have relatively solid public finances could
massively escalate economic disruption.
Pressures on bank funding and balance sheets increase the risk of a credit crunch.
Another
serious downside risk is that no action would be agreed to offset the
large degree of fiscal tightening implied by current law in the US. This
could tip the economy into a recession that monetary policy could do
little to counter.
“Prospects only improve if decisive action is taken quickly,” said OECD Chief Economist Pier Carlo Padoan.
“In
the euro area, the risk of contagion needs to be stemmed through a
substantial increase in the capacity of the European Financial Stability
Fund, together with a greater ability to call on the European Central
Bank’s balance sheet. Much greater firepower must be accompanied by
governance reforms to offset the risk of moral hazard,” he said.
Improved prospects would also depend on the enactment of a credible medium-term fiscal program in the US.
The
outlook’s baseline scenario assumes that policy-makers take sufficient
action to avoid disorderly sovereign defaults, a sharp credit
contraction, systemic bank failures and excessive fiscal tightening.
It
sees GDP across the OECD countries slowing from 1.9 percent this year
to 1.6 percent in 2012, before recovering to 2.3 percent in 2013.
Unemployment in the OECD area is also projected to remain high for an
extended period, with the jobless rate staying at around 8 percent
through the next two years. “We are concerned that policy-makers fail to
see the urgency of taking decisive action to tackle the real and
growing risks to the global economy,” Padoan said during the launch of
the report in Paris.
“We see the US growth recovering only
slowly, the euro area entering into mild recession and Japan growing
faster because of reconstruction, but this boost is temporary and will
fade away.”
US GDP is projected to rise by 2.0 percent in 2012
and by a further 2.5 percent in 2013, after an expected expansion of 1.7
percent this year.
Euro area growth is forecast to slow down
from 1.6 percent this year to 0.2 percent next year, before picking up
to 1.4 percent in 2013.
In Japan, GDP is expected to expand by 2
percent in 2012 and 1.6 percent in 2013, following a contraction of 0.3
percent in 2011, which reflects the impact of the earthquake and tsunami
and subsequent reconstruction activity.
Chinese economic growth
is seen easing to 8.5 percent in 2012, from 9.3 percent this year,
before climbing back to 9.5 percent in 2013. Weaker activity in China
and other emerging-market economies together with modest falls in
commodity prices should put inflation in these countries on a downward
trend, allowing some easing of monetary policy.
The outlook’s
baseline scenario assumes that policy-makers take sufficient action to
avoid disorderly sovereign defaults, a sharp credit contraction,
systemic bank failures and excessive fiscal tightening.
It sees
GDP across the OECD countries slowing from 1.9 percent this year to 1.6
percent in 2012, before recovering to 2.3 percent in 2013. Unemployment
in the OECD area is also projected to remain high for an extended
period, with the jobless rate staying at around 8 percent through the
next two years.
“We are concerned that policy-makers fail to see
the urgency of taking decisive action to tackle the real and growing
risks to the global economy,” Padoan said during the launch of the
report in Paris.
“We see the US growth recovering only slowly,
the euro area entering into mild recession and Japan growing faster
because of reconstruction, but this boost is temporary and will fade
away.”
US GDP is projected to rise by 2.0 percent in 2012 and by a
further 2.5 percent in 2013, after an expected expansion of 1.7 percent
this year.
Euro area growth is forecast to slow down from 1.6
percent this year to 0.2 percent next year, before picking up to 1.4
percent in 2013. In Japan, GDP is expected to expand by 2 percent in
2012 and 1.6 percent in 2013, following a contraction of 0.3 percent in
2011.
, which reflects the impact of the earthquake and tsunami and subsequent reconstruction activity.
Chinese
economic growth is seen easing to 8.5 percent in 2012, from 9.3 percent
this year, before climbing back to 9.5 percent in 2013.
Weaker
activity in China and other emerging-market economies together with
modest falls in commodity prices should put inflation in these countries
on a downward trend, allowing some easing of monetary policy.
Under
the baseline scenario, weak activity, low levels of inflation and
predominantly downside risks should trigger strongly accommodative
monetary policy in OECD countries.
Central banks should provide
ample liquidity to calm tensions in financial markets and prepare
contingency plans that could be implemented swiftly if needed.
On
the contrary, a continued lack of effective action could trigger an
alternative, downside scenario where the outlook becomes much bleaker.
This
scenario could be prompted by a worsening of existing concerns about
the banking system, contagion in euro-area sovereign debt markets or an
excessively tight fiscal policy in the US linked to the current
political gridlock.
In the Strategic Response section of its
Outlook, the OECD identifies country-specific policies that should be
implemented if the macroeconomic situation derails: The financial sector
must be stabilized, the social safety net protected and monetary policy
eased further. Where feasible, governments should provide fiscal
support while strengthening fiscal frameworks to reassure markets that
public finances can be brought under control.
Under this
scenario, a wide range of structural measures to boost jobs and economic
activity, all desirable in their own right, will become urgent.
Effective
labor market policies are needed to tackle unemployment which risks
turning from cyclical to structural, thereby sapping potential growth,
hitting confidence and weakening public finances.
JEDDAH: Decisive policies must be urgently put in place to
stop the euro area sovereign debt crisis from spreading and to put
weakening global activity back on track, says the OECD’s latest Economic
Outlook.
The euro area crisis remains the key risk to the world
economy, the outlook says. Concerns about sovereign debt sustainability
are becoming increasingly widespread. If not addressed, recent contagion
to countries thought to have relatively solid public finances could
massively escalate economic disruption.
Pressures on bank funding and balance sheets increase the risk of a credit crunch.
Another
serious downside risk is that no action would be agreed to offset the
large degree of fiscal tightening implied by current law in the US. This
could tip the economy into a recession that monetary policy could do
little to counter.
“Prospects only improve if decisive action is taken quickly,” said OECD Chief Economist Pier Carlo Padoan.
“In
the euro area, the risk of contagion needs to be stemmed through a
substantial increase in the capacity of the European Financial Stability
Fund, together with a greater ability to call on the European Central
Bank’s balance sheet. Much greater firepower must be accompanied by
governance reforms to offset the risk of moral hazard,” he said.
Improved prospects would also depend on the enactment of a credible medium-term fiscal program in the US.
The
outlook’s baseline scenario assumes that policy-makers take sufficient
action to avoid disorderly sovereign defaults, a sharp credit
contraction, systemic bank failures and excessive fiscal tightening.
It
sees GDP across the OECD countries slowing from 1.9 percent this year
to 1.6 percent in 2012, before recovering to 2.3 percent in 2013.
Unemployment in the OECD area is also projected to remain high for an
extended period, with the jobless rate staying at around 8 percent
through the next two years. “We are concerned that policy-makers fail to
see the urgency of taking decisive action to tackle the real and
growing risks to the global economy,” Padoan said during the launch of
the report in Paris.
“We see the US growth recovering only
slowly, the euro area entering into mild recession and Japan growing
faster because of reconstruction, but this boost is temporary and will
fade away.”
US GDP is projected to rise by 2.0 percent in 2012
and by a further 2.5 percent in 2013, after an expected expansion of 1.7
percent this year.
Euro area growth is forecast to slow down
from 1.6 percent this year to 0.2 percent next year, before picking up
to 1.4 percent in 2013.
In Japan, GDP is expected to expand by 2
percent in 2012 and 1.6 percent in 2013, following a contraction of 0.3
percent in 2011, which reflects the impact of the earthquake and tsunami
and subsequent reconstruction activity.
Chinese economic growth
is seen easing to 8.5 percent in 2012, from 9.3 percent this year,
before climbing back to 9.5 percent in 2013. Weaker activity in China
and other emerging-market economies together with modest falls in
commodity prices should put inflation in these countries on a downward
trend, allowing some easing of monetary policy.
The outlook’s
baseline scenario assumes that policy-makers take sufficient action to
avoid disorderly sovereign defaults, a sharp credit contraction,
systemic bank failures and excessive fiscal tightening.
It sees
GDP across the OECD countries slowing from 1.9 percent this year to 1.6
percent in 2012, before recovering to 2.3 percent in 2013. Unemployment
in the OECD area is also projected to remain high for an extended
period, with the jobless rate staying at around 8 percent through the
next two years.
“We are concerned that policy-makers fail to see
the urgency of taking decisive action to tackle the real and growing
risks to the global economy,” Padoan said during the launch of the
report in Paris.
“We see the US growth recovering only slowly,
the euro area entering into mild recession and Japan growing faster
because of reconstruction, but this boost is temporary and will fade
away.”
US GDP is projected to rise by 2.0 percent in 2012 and by a
further 2.5 percent in 2013, after an expected expansion of 1.7 percent
this year.
Euro area growth is forecast to slow down from 1.6
percent this year to 0.2 percent next year, before picking up to 1.4
percent in 2013. In Japan, GDP is expected to expand by 2 percent in
2012 and 1.6 percent in 2013, following a contraction of 0.3 percent in
2011.
, which reflects the impact of the earthquake and tsunami and subsequent reconstruction activity.
Chinese
economic growth is seen easing to 8.5 percent in 2012, from 9.3 percent
this year, before climbing back to 9.5 percent in 2013.
Weaker
activity in China and other emerging-market economies together with
modest falls in commodity prices should put inflation in these countries
on a downward trend, allowing some easing of monetary policy.
Under
the baseline scenario, weak activity, low levels of inflation and
predominantly downside risks should trigger strongly accommodative
monetary policy in OECD countries.
Central banks should provide
ample liquidity to calm tensions in financial markets and prepare
contingency plans that could be implemented swiftly if needed.
On
the contrary, a continued lack of effective action could trigger an
alternative, downside scenario where the outlook becomes much bleaker.
This
scenario could be prompted by a worsening of existing concerns about
the banking system, contagion in euro-area sovereign debt markets or an
excessively tight fiscal policy in the US linked to the current
political gridlock.
In the Strategic Response section of its
Outlook, the OECD identifies country-specific policies that should be
implemented if the macroeconomic situation derails: The financial sector
must be stabilized, the social safety net protected and monetary policy
eased further. Where feasible, governments should provide fiscal
support while strengthening fiscal frameworks to reassure markets that
public finances can be brought under control.
Under this
scenario, a wide range of structural measures to boost jobs and economic
activity, all desirable in their own right, will become urgent.
Effective
labor market policies are needed to tackle unemployment which risks
turning from cyclical to structural, thereby sapping potential growth,
hitting confidence and weakening public finances.