OECD cuts global growth forecast for 2014

A delegate at the OECD headquarters The global economy will grow by less than expected this year

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The global economy will grow by less than expected this year as growth in developing economies slows, The Organisation for Economic Co-operation and Development predicts.

It expects 3.4% world growth this year, down from its 3.6% November forecast. In 2015, however, it still expects growth of 3.9%.

It cut forecasts for China and the US.

"We are still not out of the woods yet," said OECD Secretary General Angel Gurria.

In the UK, the OECD predicted growth of 3.2% for this year, up from its forecast of 2.4% just six months ago. It also upgraded its forecast for 2015 to 2.7% from 2.5%.

The upgrade for the UK was the highest of the G7 countries.

The OECD credited the UK's "very accommodative monetary policy" and stronger jobs growth for the improved forecast.

"Economic activity is expected to continue to be sustained by household spending and further boosted by a pick-up in investment," it added.

Slower momentum

However, in its report, it warned that "still-high unemployment in many countries and the subdued pace of growth in many emerging market economies relative to past norms" was likely to limit the momentum of the global recovery.

The OECD now forecasts 7.4% growth in China for this year, down from its 8.2% November forecast.

Meanwhile, the US economy is forecast to grow 2.6% this year against last November's 2.9% estimate, because of a combination of bad weather in December and October's government shutdown.

However, it increased its forecast for the euro area, predicting growth of 1.2% against its November forecast of just 1%.

Despite the increase in its growth forecast, it warned that the European Central Bank needed to take action to protect itself against the risk of deflation.

It suggested cutting its main interest rate to zero and said it should also consider bond purchases similar to those by the Federal Reserve.

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