OECD slashes its Eurozone growth forecast by a third

 
Emma Haslett
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Rock-bottom inflation is a "key risk", said the OECD
The Organisation for Economic Cooperation and Development has cut its 2014 GDP growth forecast for the Eurozone by a third, from 1.2 per cent to 0.8 per cent.
It also reduced its 2015 outlook for the area, from 1.7 per cent in May to 1.1 per cent now.
In its interim economic assessment, published today, the think tank said a “tepid rate of growth means that a substantial degree of labour market slack remains”, adding that “growth looks set to remain subdued”.
The recovery in the euro area has remained disappointing, notably in the largest countries: Germany, France and Italy. Confidence is again weakening, and the anaemic state of demand is reflected in the decline in inflation, which is near zero in the zone as a whole and negative in several countries.
While the resumption in growth in some periphery economies is encouraging, a number of these countries still face significant structural and fiscal challenges, together with a legacy of high debt.
In fact, low inflation in the Eurozone was a “key risk”, it said, pointing out “the succession of downward surprises has increased the risk that inflation remains far below the ECB’s [European Central Bank’s] target for a more extended period”.
The Eurozone wasn’t the only area suffering - 2014 growth expectations for Brazil fell from 1.8 per cent in May to just 0.3 per cent. Even the growth prospects of the UK - currently seen as one of the most promising economies - were downgraded, albeit by just 0.1 percentage points, to 3.1 per cent.

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