The US and Japan are leading a rebound in advanced economies, while the still fragile eurozone needs an interest rate cut to ensure a recovery takes hold, the OECD said.
The outlook has finally strengthened for the Group of Seven economies, though it is still too soon for governments and central banks to drop exceptional measures to prop up growth, the Organisation for Economic Cooperation and Development said.
The OECD forecast that these major economies would grow on average 2.4 per cent in the first quarter on an annualised basis, after shrinking 0.5 per cent in the previous three months.
Their growth pace would cool slightly in the second quarter to average 1.8 per cent in the second quarter, the Paris-based organisation forecasts.
“The bottom line is that we are moderately more optimistic,” OECD chief economist Pier Carlo Padoan said. “We see growth firming in the US, we see more growth in Japan thanks to new measures, and we see more growth in Germany.”
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.
The US, the world’s biggest economy, was seen leading the pack with growth estimated to reach 3.5 per cent in the first quarter, slowing to two per cent in the following three months. New measures to boost the Japanese economy would help it grow 3.2 per cent in the first quarter and 2.2 per cent in the second quarter.
However, growth rates diverged widely among the eurozone’s biggest economies with Germany seen bouncing back after shrinking at the end of 2012 to grow 2.3 per cent in the first quarter and 2.6 per cent in the second quarter.
In contrast, France was seen emerging from recession only in the second quarter, with growth of 0.5 per cent, while Italy would remain stuck in a long-running recession.
With inflation low, Padoan said the European Central Bank would be justified in cutting interest rates and an indication of its future intentions for rates could be needed.
While plans in Japan for more aggressive Central Bank easing were welcomed in the OECD’s eyes, it said the need for such measures in the US was beginning to subside.
The OECD warned that vast amounts of Central Bank liquidity pumped into economies may be encouraging some investors to take on too much risk given the still shaky foundations of recovery in most economies.