Governments in Europe must act now to support continued growth

Unemployment and modest global economic forecasts continue to hamper global economic growth, according to the OECD’s Economic Outlook released today.

The report predicts that global GDP growth will reach 3.3% this year, reaching 3.7% in 201 and 3.9% in 2016. However, these figures are considered modest, according to the OECD, when compared with the pre-crisis period.

The euro area is only projected to grow by 0.8% in 2014 and it is feared that, while growth is expected to increase to 1.1% next year, the prolonged stagnation in Europe could drag global growth predictions down.

The OECD highlight the fragile status of Europe’s economies, and how a negative shock could lead to prolonged and unacceptable levels of unemployment.

Despite recent reports, the United States is projected to rise to a growth of around 3% in 2015, while China’s growth predictions predict a fall from 7.3% rate of growth to 6.9% in 2016.

The impact of China’s rate of growth decline would be felt worldwide with a drop in growth of 2% could see global GDP growth fall by 0.3%.

OECD’s Chief Economist, Catherine L Mann believes that European governments need to take strong action now “With the euro zone outlook weak and vulnerable to further bad news, a stronger policy response is needed, particularly to boost demand. That will mean more action by the European Central Bank and more supportive fiscal policy, so that there is space for deeper structural reforms to take hold. A Europe that is doing poorly is bad news for everyone.”

In the UK, the OECD is predicting that the UK’s growth is expected to match that of the OECD, although is predicted to fall to 2.5% by 2016, however unemployment is also expected to continue to fall in that period. In Australia GDP growth is expected to dip to 2.5% in 2015, but recover to 3% 2016.