OECD warns of European recession
Tuesday, 29 November 2011 | 00:00
The OECD has warned that the eurozone and UK could be entering a recession, and has cut its global growth forecast.The OECD predicted the eurozone economy would shrink in the fourth quarter by 1%, and by 0.4% in the first quarter of next year.
For the UK, the OECD's predictions are a 0.03% contraction this quarter, and a further 0.15% next.
The group also revised down its forecast for global economic growth to 3.8% this year and 3.4% next year.
However it said that a "negative event" in the eurozone could cause a global contraction.
The Organisation for Economic Cooperation and Development represents wealthy countries such as those within the eurozone, the US and Japan.
"More than usual, world economic prospects depend on events," it warned.
In the absence of such an event, the OECD's Economic Outlook predicted positive growth in the eurozone for 2012 as a whole of 0.2%, despite a shallow recession in the period September 2011 to March 2012.
UK growth would be faster next year, at 0.5%, the OECD said.
The economy is expected to continue to grow by 1.7% this year and 2% in 2012.
However a failure by the US Congress to agree a more balanced way to cut the federal government's deficit could also see the US economy shrinking, the OECD warned, as in the absence of a deal harsh government spending cuts and tax rises are due to take place over the next 15 months.
"Much tighter fiscal tightening in the US could tip the US economy into a recession that monetary policy can do little to prevent," it warned.
Global trade growth is also slowing according to the group.
Trade will have risen by 6.7% by the end of this year, it predicted, but will slow to 4.8% during 2012.
"International trade growth has weakened significantly. Contrary to what was expected earlier this year, the global economy is not out of the woods," the report warned.
Source: BBC News
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