Eurozone countries are falling far behind the United States and Canada even as a fragile recovery takes root according to the Organisation for Economic Cooperation and Development.
The OECD’s chief economist Pier Carlo Padoan said the risk of something derailing that recovery has diminished, but not disappeared: “We believe it has come down a bit, so those risks are smaller, but they are not gone away. If you take the G7 as a group there is a recovery which is firming, with respect to last year’s numbers, but this is clearly coming at different speeds, with North America and the United States going faster and the euro area still in a weak spot.”
The economic think tank said the Group of Seven advanced economies are on course for average annualised growth of 1.9 percent in the first half of this year but with wide variations.
An improving US labour market would help the world’s biggest economy grow 2.9 percent in the first quarter on the same basis, and 2.8 percent in the second quarter, the OECD said.
It believes the UK’s recovery will be weak and the eurozone’s weaker still.
Britain’s economy was seen contracting an annualised 0.4 percent in the first quarter before posting growth of 0.5 percent in the following quarter.
The economies of France and Italy are pretty sure to be in contraction in the first quarter and Germany would grow just 0.1 percent.
Grappling with weak industrial production and fragile household confidence, Italy would be stuck in recession as its economy contracted an annualised 1.6 percent in the first quarter and 0.1 percent in the second quarter, the organisation estimated.
To maintain the rebound momentum the OECD advised central banks to keep the easy money flowing and possibly an interest rate cut by the ECB.
“Monetary policy needs to be supportive in the medium term to allow this process to continue,” Padoan said.