New Delhi: The world economy is likely to grow at 3.4 percent in 2014 due to poor performance in developing economies like India and China, the OECD said Tuesday, lowering the projection from its previous forecast of 3.6 percent.
According to the OECD's latest Economic Outlook, the global economic growth is estimated to accelerate to 3.9 percent in 2015.
In its previous report released in November last year, the Paris-based Organisation for Economic Cooperation and Development (OECD) had pegged the world economic growth for 2014 at 3.6 percent.
Among the major advanced economies, recovery is best established in the United States, which is projected to grow by 2.6 percent in 2014 and 3.5 percent in 2015. The euro area will see a return of positive growth after three years of contraction: 1.2 percent in 2014 and 1.7 percent in 2015.
In Japan, growth will be dented by the launch of much-needed fiscal consolidation measures, and is expected to hover at 1.2 percent in 2014 and 2015, the OECD said.
The BRIICS (Brazil, China, India, Indonesia, Russia and South Africa) are projected to see GDP growth of 5.3 percent this year on average and 5.7 percent in 2015. The official BRICS does not include Indonesia.
China will again have the fastest growth among these countries, with rates just below 7.5 percent in 2014 and 2015.
The Outlook draws attention to a range of positive developments as well as significant downside risks. Investment and trade are both showing signs of picking up, but growth will remain moderate by past standards. Financial conditions are improving in the advanced economies, but tighter credit and supply side bottlenecks are damping growth in emerging economies.
“Advanced economies are gaining momentum and driving the pick-up in global growth, while once-stalled cylinders of the economic engine, like investment and trade, are starting to fire again,” OECD Secretary-General Angel Gurría said while launching the Outlook during the Organisation's annual Ministerial Council Meeting and Forum in Paris.
“But with the world still facing persistently high unemployment, countries must do more to enhance resilience, boost inclusiveness and strengthen job creation,” Gurría said.
In the report, the OECD highlighted a number of policy requirements for further strengthening the recovery.
“Monetary policy needs to remain accommodative, especially in the euro area, where a further interest rate reduction is merited, given low and falling inflation, and in Japan, where asset purchases should continue as planned,” the OECD said in a statement.
“In the US, where the recovery is more firmly based, asset purchases by the Federal Reserve should be gradually phased out during 2014 and policy rates should start to be raised during 2015,” it said.
More ambitious structural reform programmes are needed to create jobs and boost growth in advanced and emerging countries alike, the Paris-based think tank added.