Group warns on outlook for global economy

Eurozone woes, US fiscal battles weigh heavily

PARIS — The global economy could easily slide back into recession if its major problems — like US budget standoffs and Europe’s lack of jobs — are left to fester, a leading international economic body said Tuesday.

In its half-yearly update, the Organization for Economic Cooperation and Development warned that the recovery will be ‘‘hesitant and uneven’’ over the coming two years and that a new major contraction cannot be ruled out.

‘‘The world economy is far from being out of the woods,’’ the group’s secretary general, Angel Gurria, said. ‘‘Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs in the United States, Europe, and elsewhere.’’


Gurria’s downbeat assessment came as the OECD published a fairly glum set of predictions. Though the world economy is expected to grow by 3.4 percent next year, up from 2.9 percent this, the numbers mask big divergences around the world.

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Though countries like China, Brazil, and India are expected to see growth pick up, the more established economies that the Paris-based OECD traditionally monitors remain stuck in a rut.

In particular, the OECD was gloomier about Europe than in its last forecast six months ago, saying ‘‘the greatest threats to the world economy’’ lie in the 17-country eurozone, which continues to grapple with a debt crisis after three years. A deep global recession is also possible, it said, if the European crisis doesn’t stabilize.

The OECD is now predicting a 0.4 percent contraction this year for the eurozone, worse than May’s 0.1 percent forecast. For next year, it’s forecasting a further 0.1 percent fall, in contrast to the previous prediction of 0.9 percent growth.

It also downgraded its forecasts for the US economy and warned that it could be worse if the White House doesn’t clinch a deal with lawmakers on the budget.


Assuming a deal is thrashed out, the OECD has penciled in growth of 2 percent for the US next year, down from a forecast of 2.6 percent in May.

The OECD cautioned that growth outside the OECD — which comprises 34 developed economies mostly in North America and Europe — would be slightly faster but crimped by Europe’s troubles.

‘‘A slowdown has surfaced in many emerging market economies, partly reflecting the impact of the recession in Europe,’’ said Pier Carlo Padoan, the OECD’s chief economist.

The OECD also warned the United States and Europe against cutting spending too sharply and too quickly, saying that could further hurt growth prospects.