OECD lifts European growth forecasts

The OECD has lifted its growth forecasts for Germany, France and the UK, while urging the region’s most- indebted nations to step up changes to improve competitiveness. Germany will expand 0.7 per cent this year instead of the 0.4 per cent predicted in May, while France will grow 0.3 per cent instead of shrinking 0.3 per cent as previously predicted, the Paris-based organisation said today. Growth in the UK, which isn’t part of the euro bloc, will be 1.5 per cent.

Europe’s economic revival comes in the face of slower growth elsewhere, especially in emerging markets. Policy makers need to stand ready to support demand should the recovery falter, said the OECD, which advises its 34 member governments on economic policy.

“In the euro area, re-balancing remains incomplete with weak domestic demand in high debt countries having been offset by stronger exports only to a limited extent,” the OECD said. “Supportive monetary conditions must be maintained, while scope for further monetary easing remains if the recovery were to fail to take hold.”

Italy, the third-largest euro-area economy, stands out for showing little signs of recovery, according to the OECD. Italian gross domestic product will probably shrink 1.8 pe rcent this year, the OECD said, maintaining its May forecast.

In the US, the world’s largest economy, 2013 GDP will expand 1.7 per cent instead of the 1.9 per cent predicted in May. China’s expansion will be 7.4 per cent instead of the 7.8 per cent previously predicted.

“Growth in China has seemingly already passed the trough and looks set to recover further in the second half,” the OECD said. “In a number of other emerging economies, the recent financial market tensions and weak momentum suggest both a reappraisal of trend growth and deterioration in cyclical conditions.”