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TheStreet Open House

Global Growth Likely To Lag Despite Europe Rebound

By SARAH DiLORENZO

PARIS (AP) a¿¿ Global growth is expected to lag this year and next, but for the first time in a long time, it's not all Europe's fault.

That's the view of a leading international economic body, which said Tuesday that a slowdown in emerging economies and the potential for another U.S. budget crisis are the main sources of concern for the global economy.

In its half-yearly forecast, the Organization for Economic Cooperation and Development lowered its forecast for global growth this year to 2.7 percent and 3.6 percent for next. In May, it had predicted 3.1 percent and 4 percent growth, respectively.

"We can't get (the world economy) out of first gear," said Angel Gurria, the secretary-general of the organization, a think tank for the world's most developed economies. While it has no policymaking power, the OECD's forecasts are closely watched and its recommendations are influential in government circles.

Just as the economy of the 17-country eurozone is emerging from its longest-ever recession brought on by a debt crisis, other economies are beginning to slow.

Emerging markets, which have helped shore up global growth in recent years, are beginning to lag, partially over fears that a pickup in the U.S. economy will spell the end of cheap credit.

"The BRIICS (Brazil, Russia, India, Indonesia, China, South Africa) have been big machines of growth, they were pulling the world, and they are decelerating," said Gurria.

Among those economies, Indonesia, for instance, is projected to grow 5.2 percent this year and 5.6 percent next. In May, the OECD was predicting at least 6 percent growth for both years. In India, the growth projection for this year has slid from 5.7 percent to 3.4 percent.

The Federal Reserve has pumped trillions of dollars into the U.S. economy in an attempt to keep interest rates low and get money flowing. The stimulus, which has been going on in various guises for years, has also helped sustain growth in emerging countries. Now businesses there are bracing themselves for the policy's end.

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