The Organization for Economic Cooperation and Development (OECD) assumes that the GDP for its 34 member countries will grow by 1.4% in 2013 followed by a 2.3% increase the year after. The eurozone is forecast to remain nearly flat at –0.1% in 2013 and to grow by 1.3% in 2014. For the United States, the OECD predicts a 2.0% GDP increase in 2013 and another 2.8% rise in 2014.
For Brazil, the OECD expects GDP to grow 4.0% in 2013 and 4.1% a year later. China is forecast to show GDP growth of 8.5% in 2013 and a further 8.9% in 2014 and for India the experts assume a GDP increase of 5.9% in 2013 and 7.0% the year after.
On the other hand, the OECD cites a significant drop in confidence for its outlook. This lack of confidence largely reflects insufficient or ineffective policy responses to reach consensus on measures to address the global economic crisis. The OECD also states that the eurozone still poses the greatest threats to the world economy. The crisis in the eurozone is being sustained by three negative feedback loops: solvency fears for banks, break-up fears for the monetary union and worries surrounding government debt. Progress towards a fully fledged banking union is essential to complete the architecture of the eurozone, the OECD says. This would involve supervision at eurozone level and effective cross-border crisis resolution procedures.
For the United States, the OECD sees current policies appropriate as the employment outlook is improving and inflation expectations are well anchored.
If serious downside risks were to materialize, further policy support would be essential. These downside risks include the eurozone crisis as the largest one and excessive budgetary tightening in the United States (the “fiscal cliff”) as well as geopolitical risks.
The International Monetary Fund (IMF) considers downside risks to be higher than previously. A key question in its forecast is whether the global economy is just hitting another bout of turbulence or whether the current slowdown has a more lasting component. Its forecast is based on European and U.S. policymakers dealing proactively with their major short-term economic challenges. Thus, global activity is projected to re-accelerate. For the medium term the IMF notes that important questions remain about how the global economy will operate in a world of high government debt and whether emerging market economies can maintain their strong expansion while shifting further from external to domestic sources of growth.