The recovery in developed economies is on track, although slowing activity in big emerging markets means global growth will be only moderate at best in the near term, the Organisation for Economic Cooperation and Development (OECD) said on Tuesday.
Exceptionally bad winter weather in North America and a sales tax hike in Japan are also disrupting the pace of recovery, the Paris-based OECD said.
Against that backdrop, the OECD urged the European Central Bank and the Bank of Japan to keep up their monetary stimulus—if not increase it—while it said the U.S. Federal Reserve was right to begin winding down its bond-buying program.
“The gradual recovery in the advanced economies is encouraging, even if temporary factors have pushed down growth rates in the early months of this year, while the slowdown in emerging economies is likely to be a drag on global growth,” OECD acting chief economist Rintaro Tamaki said in a statement.
Growth for major advanced economies in the first half of 2014 will be slower than in the second half of 2013 but much improved from the sluggish rates of late 2012 and early 2013, the OECD said in an update of its views on the global economy.
“Given that emerging economies now account for over half the world economy, continued subpar economic performance for several of the major EMEs (emerging market economies) is likely to mean that global growth remains only moderate in the near term,” the OECD said.
It estimated growth in the United States would slow to 1.7 percent in the first quarter from the previous three months on an annualized basis, down from 2.4 percent in the fourth quarter when exceptionally bad weather weighed on activity.
Japanese growth would surge 4.8 percent in the first quarter from the previous quarter as consumers brought forward purchases ahead of a sales tax increase on April 1.
The OECD gave its updated forecasts as part of an interim health check for the global economy before its much more detailed Economic Outlook due in May. It did not update its estimates for U.S. and Japanese growth in the second quarter because one-off factors made it too problematic, it said.
Turning to Europe, the OECD saw Germany’s quarter-on-quarter annualized growth rate reaching 3.7 percent in the first quarter before slowing to 2.5 percent.
France, the eurozone’s second biggest economy after Germany, was seen growing only 0.7 percent in the first three months of the year, rising to 1 percent in the second quarter.
Outside the eurozone, the British economy was seen growing 3.3 percent in both the first and second quarters.
Turning to emerging market economies, the OECD said some were seeing a marked loss of momentum as capital outflows exposed vulnerabilities in some countries.
It noted that Brazil, India, South Africa and Turkey among others have been forced to raise interest rates to keep capital outflows in check.
Meanwhile, weak balance sheets in China raised the risk of a sharp slowdown there, the OECD said.