OECD economic outlook: Where are the world's trouble spots?

 
Jessica Morris
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The Eurozone is a key risk to global growth, the OECD has said. (Source: Getty)

A stagnant Eurozone, troubled Japan and divergent global monetary policy could hamper global growth over the next two years, according to the OECD.

The Organization for Economic Cooperation and Development has warned that global growth will reach 3.3 per cent this year, rising to 3.7 per cent next year and finally hit 3.9 per cent in 2016.

"A moderate improvement in global growth is expected over the next two years, but with marked divergence across the major economies and large risks and vulnerabilities," the Paris-based think tank said.

So what are the world's global growth trouble spots?

The Eurozone economies stagnate

The biggest cause for concern is the embattled Eurozone.

"The euro area is grinding to a standstill and poses a major risk to world growth, as unemployment remains high and inflation persistently far from target," the OECD said.

Last month it beat expectations growing by 0.2 per cent in the third quarter, according to figures published by Eurostat. However this was still far from where it needs to be, with Italy's economy contracting again and Germany narrowly avoiding recession.

The OECD estimates that the Eurozone economy will grow by 0.8 per cent this year.

Recessionary Japan

The OECD more than halved Japan's forecast for this year and cut growth expectations to 0.8 per cent for 2015.

However it thinks that Japan will make a comeback, because company profits are still high, and a weak yen will help buoy exports.

Japan slipped into a technical recession earlier this month, after its economy unexpectedly shrank for the second quarter.

Monetary policy pulls apart

As growth rates in some of the world's biggest economies diverge, this will be reflected in their monetary policy.

The US and the UK are expected to raise interest rates in 2015, but at the same time the Eurozone and Japan will loosen their monetary policy.

"These differences will inevitably result in volatility in debt and foreign exchange markets, and may uncover excesses in advanced, and especially emerging economies", the OECD said.

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