Risk of negative growth high: OECD

Economic growth in the G7 countries, excluding Japan, will stagnate at an annual rate of less than one per cent in the second half of 2011, predicts an analysis by the OECD.

''Growth is turning out to be much slower than we thought three months ago, and the risk of hitting patches of negative growth going forward has gone up,'' OECD chief economist Pier Carlo Padoan said in its latest interim economic assessment.

According to Padoan, economic recovery appears to have come close to a halt in the major industrialised economies, with falling household and business confidence affecting both world trade and employment. Growth remains strong in most emerging economies, albeit at a more moderate pace.

The debate over fiscal policy in the US, the sovereign debt crisis in some countries of the euro area and the fact that governments have fewer options to boost growth are driving both business and consumer confidence downward.

The extent of bank deleveraging, due to the impact of regulatory changes, may also have been underestimated, says the new analysis by the OECD.

While the Paris-based organisation does not expect a return to the recession of 2008 and 2009, it warns that continued contraction in some countries could derail medium-term growth. It expects a sharp slowdown in the US, predicting 1.1 per cent growth in the third-quarter and 0.4 per cent in the fourth-quarter.