PARIS — Economic recovery in the world’s richest countries is accelerating thanks to a “substantial” rebound in trade and growth in Asia, but austerity measures are needed to reduce government deficits, a leading agency said Wednesday.
The Organization for Economic Co-operation and Development, a watchdog for 31 of the world’s most developed countries, said the current environment is “relatively auspicious” but faced with serious risks.
Those include Europe’s sovereign debt crisis and a possible boom-bust scenario in emerging markets such as Brazil, India and China — which have been growing much faster than the more developed OECD economies.
“The period of significant financial instability that began in August 2007 is not yet over,” the OECD warned in its latest biannual Economic Outlook.
The Paris-based group also raised its forecasts for economic growth in its member countries — which include Canada, the United States, Japan, Germany and the United Kingdom — to 2.7 per cent this year, up from its forecast of 1.9 per cent last November.
Canada’s growth this year is expected to be ahead of most other OECD countries, with real gross domestic product to be 3.6 per cent over the weak performance of 2009.
The OECD lifted its forecasts for Japan, the United States and the eurozone countries, but Japan and the U.S. are still expected to outpace Europe, the report said. Japan’s growth is estimated at 3.0 per cent in 2010 and the U.S. GDP is expected to rise by 3.2 per cent.
“The outlook has really improved in this short period” since the OECD’s last forecast, Secretary-General Angel Gurria said in a news conference at the organization’s headquarters.
But the OECD chief urged member countries to pursue “fiscal consolidation” — reducing their deficits through spending cuts and a clampdown on tax evasion — which he said was “imperative” to make the OECD’s positive growth outlook a reality.
The OECD publishes its economic outlook twice a year, although it updated some 2010 forecasts in an interim assessment published in April.
Europe’s response to its sovereign debt crisis has been “prompt and massive,” the OECD said, but has failed to settle the currency bloc’s “underlying weaknesses.”