Thursday, May 27, 2010

World Economic Outlook (Appears to Be) Improving

By Darragh Worland

We're not in the clear yet, but with the right monitoring and policies, we can all keep up the good work.




The global economic outlook — at least among industrialized countries — is brightening, but it still has a few dark spots, according to Paris-based organization Organization for Economic Cooperation and Development (OECD).



According to the organization, whose members include the world’s 30 richest nations, gross domestic product in those countries will grow by as much as 2.7 percent this year and 2.8 percent in 2011, reports MarketWatch.com. That’s a nice improvement over earlier estimates in November of closer to 1.9 and 2.5 percent growth, respectively.



The OECD also boosted its outlook for US economic growth in 2010, forecasting that GDP will grow at a 3.2 percent pace and not the 2.5 percent pace predicted earlier. The OECD expects growth of 3.2 percent in 2011 as well. It had some advice for the US to help keep up the good work, advising that the Federal Reserve and the Obama administration "should gradually withdraw policy stimulus as economic growth becomes self sustaining [ ... ] Gauging the appropriate timing will not be a simple task, but keeping the stimulus in place risks recreating some of the imbalances in the housing and financial markets that led to the financial crisis."



Still, analysts warn that we’re not out of the recessionary woods just yet, as there are some signs of trouble, including rising credit rates and the debt crisis in Greece.



"The sovereign debt crisis has highlighted the need for the euro area to strengthen significantly its institutional and operational architecture to dissipate doubts about the long-term viability of the monetary union," said OECD chief economist Pier Carlo Padoan. "At a minimum, surveillance of domestic policies needs to be strengthened, taking on board broader competitiveness considerations."



The OECD also advised the Bank of Japan to keep interest rates at their "very low current level," and advised the British government to normalize interest rates in the face of a likely gradual increase in inflation.

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