Eurozone outlook still gloomy as others recover

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Eurozone outlook still gloomy as others recover

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The United States and Japan are leading an economic rebound according to the latest forecast from the Organisation for Economic Co-operation and Development, which says the outlook has finally strengthened for the Group of Seven top world economies.

But the OECD cautioned it was too soon for governments and central banks to end their exceptional measures to prop up growth and thinks the eurozone needs an interest rate cut to ensure a recovery takes hold.

OECD Chief Economist Pier Carlo Padoan said: “In the euro area Germany is growing at a healthy rate – above 2.0 percent – which is good news; but France, which is the second largest economy, will not be growing possibly at all in 2013, and will possibly start growing again in the latter part of this year and Italy continues to be in recession, although this recession is shrinking which means that Italy might see positive growth at the end of 2013.”

Padoan said the European Central Bank would be justified in cutting interest rates as inflation is low and an explicit indication of its future intentions for rates could be needed.

Because of the weakness of the region’s second largest economy, France, and even greater weakness in the third biggest, Italy, the eurozone will not see a meaningful recovery until at least the second half of this year the OECD believes.

The G7 major economies would grow on average 2.4 percent in the first quarter on an annualised basis, after shrinking 0.5 percent in the previous three months it said.

The United States, the world’s biggest economy, was seen leading the pack with growth estimated to reach 3.5 percent in the first quarter, slowing to 2.0 percent in the following three months.

New measures to boost the Japanese economy would help it grow 3.2 percent in the first quarter and 2.2 percent in the second quarter.

The OECD’s latest predictions were contained in a brief report in which it gives quarterly estimates for a handful of countries before a fuller publication in May.