OECD downgrades US growth for next year but says Europe remains on target

THE Organisation for Economic Cooperation and Development (OECD) has significantly downgraded its growth projections for the US in 2011, but predicts that the Euro area will meet its June forecasts.

The OECD’s economic outlook for October claims that the US will grow 1.75-2.25 per cent next year, revised downwards from the 3.2 per cent it predicted in June. But the Euro area should grow 1.5-2 per cent, in line with its June forecast of 1.8 per cent. Specific country-by-country figures will be released on 23 November after the G20 meeting in Seoul, which takes place next week.

The organisation does not give a specific reason for the large downgrade in US growth, but it is likely that disappointing GDP figures for the third quarter – coming in at two per cent annualised growth – forced a revision.

OECD secretary general Angel Gurría admitted that the organisation had been surprised by the extent of the recovery’s slowdown: “Although expected, it is more pronounced than previously thought,” he said. He cited slowdowns in the US housing market and the possibility of a flare-up in currency wars as major risks for the recovery in developed economies.

But the US and Euro area are expected to speed up in 2012, with Japan still straggling: “The present soft patch in output growth is not project to persist for long,” said Gurría in a statement yesterday.