The Organisation for Economic Cooperation and Development says Europe and Japan are leading the world in economic growth this year overtaking the US. In the OECD’s twice-yearly report on international economic prospects, its chief economist, Jean-Philippe Cotis, said: “The current economic situation is in many ways better than what we have experienced for years.”
The organisation’s latest forecast is for growth of 2.7% this year for the euro zone going down to 2.3% next year. Just 2.1% for the US this year, rising to 2.5% in 2008 and in Japan 2.4% this year followed by 2.1% in 2008.
The OECD said the world economy is weathering the US slowdown helped by the booms in China and India. It believes the slump in the US property market has been contained, but warns it could still have an effect on financial markets and consumer spending. It said that the US economic slowdown should help lower inflation there so the Federal Reserve can reduce the cost of borrowing next year.
The European Central Bank should raise its interest rates “a bit further’‘ the OECD thinks, putting them up twice more this year by a quarter point. In the region, Germany’s expansion has been “particularly vigorous’‘ it said, with Italy rebounding “more than expected” and domestic demand is now the major driver of growth, helped by lower unemployment.