OECD sees growth rising faster, risks too

Economic activity in the Organisation of Economic Cooperation (OECD) member countries is picking up faster than expected but rising sovereign debt and an overheating in emerging-market economies pose risks to the recovery, OECD said in its latest Economic Outlook.

Gross domestic product (GDP) across OECD countries is projected to rise 2.7 per cent this year against the earlier projection of 1.9 per cent. In 2011, the growth rate is expected to be slightly higher at 2.8 per cent against the earlier forecast of 2.5 per cent.

The US economy is projected to grow 3.2 per cent this year and in 2011. The euro area is forecast to grow at 1.2 per cent this year and by 1.8 per cent next year while in Japan, GDP is expected to expand by 3.0 per cent in 2010 and by 2.0 per cent in 2011.

It said the OCED countries are emerging from recession due to the strong growth in countries like China and other emerging economies.

However, the risk of overheating and inflation is growing in emerging markets, requiring a further tightening in countries such as China and India. This could still slow growth in other regions.

OECD said exchange rate flexibility could ease some of the pressure on Chinese monetary policy and provide more scope for addressing domestic inflation. Without this, the instability in sovereign debt markets could pose another serious risk.