MercoPress. South Atlantic News Agency

OECD warns about Euro zone 'prolonged' stagnation with global impact

“We are far from being on the road to a healthy recovery. Japan has fallen into a technical recession,” OECD Secretary-General Angel Gurria said

Global economic growth in the coming two years is facing difficulties because of problems of recession in Japan and stagnation in the European economies and prospects for healthy growth “are stuck in low gear,” the Organization for Economic Cooperation and Development said on Tuesday.

 In its latest forecast through 2016, the OECD warned that “we are far from being on the road to a healthy recovery.” The regular OECD “Outlook” cited under-performance in trade and investment and divergent patterns in demand patterns across the world, both in developed and emerging economies.

“We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the Euro zone that could have impacts worldwide, while Japan has fallen into a technical recession,” OECD Secretary-General Angel Gurria said in the Outlook.

“Furthermore, diverging monetary policies could lead to greater financial volatility for emerging economies, many of which have accumulated high levels of debt.”

The OECD predicted a global Gross Domestic Product progression of 3.3% in 2014, with the rate rising to 3.7% next year and 3.9% in 2016.

This rate is “modest” when compared with historical rates before the 2008-2009 crises and “somewhat below the long-term average,” the OECD said.

The “Outlook” warned that the European problems and a “prolonged stagnation” in those economies “could drag down global growth and have knock-on effects on other economies through trade and financial links.”

The “Euro area” is projected to grow by only 0.8% this year, with a slight acceleration to 1.1% in 2015 and a modest rise in GDP growth to 1.7% in 2016, the report said, warning that “a stronger policy response is needed” to boost European demand.

“Among the major advanced economies activity is gaining strength in the United States, which is projected to grow by 2.2% in 2014 and around 3% in 2015 and 2016. In Japan, growth was impacted by consumption tax hikes in 2014, with expected growth of only 0.4% in 2014, and rises modestly to 0.8% in 2015 and 1% percent in 2016,” the OECD indicated.

At the same time, larger emerging economies show mixed outlooks, with the Chinese economy predicted to slow to 7.1% in 2015 and 6.9% in 2016, compared with 7.4% this year.