OECD Says Eurozone Recovery Still Distant

A meaningful economic recovery in the eurozone is unlikely before the second half of 2014, said the Organisation for Economic Co-operation and Development (OECD).

In its latest assessment, the Paris-based think tanks said the global outlook had shown some improvement since its previous assessment last November, but Europe’s recovery would take longer than for other G7 members due to a deteriorating jobs market and its impact on consumer confidence.

“Real activity has yet to reflect fully the improvement in financial market sentiment, especially in the euro area. This highlights the risk of asset prices getting out of line with fundamentals, especially as regards corporate securities,” said Pier Carlo Padoan, the OECD’s chief economist.

The OECD is relatively upbeat on the US and Japan, both of which it expects to return to moderate growth. The US economy is forecast to grow by 3.5% in Q113 and 2% in Q2, with the respective figures for Japan 3.2% and 2.2%.

It also anticipates a good performance for Germany, the eurozone’s largest economy, which the OECD expects to expand by 2.3% in Q113 and 2.6% in Q2. However, the region’s overall performance will be undermined by France, expected to shrink by -0.6% in Q1 before growing 0.5% in Q2, and Italy where two quarters of contraction of -1.6% and -1% respectively is foreseen.

The UK should avoid a triple-dip recession, growing by 0.5% in Q113 and improving to 1.4% in Q2.

Padoan warned that economic stimulus packages in many parts of the world had led to “excessive risk taking” caused by a flood of cheap money into the system.

“We have now learned that imbalances build up in a way we tend to ignore,” he said. “Let’s watch prices of assets going up which are not warranted by fundamentals. Let’s be very careful. At the same time, let’s be careful not to put a brake on the recovery that is slowly materialising. It’s a delicate balancing act.”

1 views

Related reading

hanjin-shipping
donald-trump
job
New consumer banking head for Citi Asia Pacific