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Growth is beginning to respond but there will be an uneven recovery

Economic activity in OECD countries will gradually pick up steam over the coming two years, but the recovery will be uneven and unemployment will remain persistently high, according to the OECD’s latest Economic Outlook.

The OECD sees the main challenge to countries at the moment as the ability to move from a policy-driven recovery toward self-sustained growth.

 “As stimulus is withdrawn, governments will have to provide a credible medium-term framework, to stabilise expectations and strengthen confidence, particularly for the private sector,” OECD Secretary-General Angel Gurría said. “Enhanced confidence could result in a faster-than-projected recovery.”
  
Gross domestic product (GDP) across OECD countries is projected to rise by 2.3% in 2011 and 2.8% in 2012. In the US, activity is projected to rise by 2.2% in 2011 and then by 3.1% in 2012. Euro area growth is forecast at 1.7% in 2011 and 2% in 2012, while in Japan, GDP is expected to expand by 1.7% in 2011 and by 1.3% in 2012.

 As far as emerging markets are concerned the OECD sees a faster rate of growth taking place which will lead to a growth in global trade of more than 8% per annum over the next two years.

The downside risks which could put the recovery off course, include the possibility of house price falls in the US and the UK, high levels of sovereign debt in some countries and possible abrupt reversals in the yields on government bonds.

The OECD suggests that countries should reduce government deficits and debts whilst putting structural reforms in place to boost growth and employment. Balance should be sought on both the fiscal and trade accounts, and monetary policy should be returned to a more normal stance.

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Posted in economic growth, International Trade, OECD

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