Growth in the U.S. and other major developed economies this year will be much lower than forecast in May amid weak demand in Europe and rising geopolitical instability, the Organization for Economic Cooperation and Development said Monday.
The U.S. economy will expand at a 2.1 percent annual rate, compared to an earlier projection of 2.16 percent, according to the OECD.
Growth in the 18-nation Eurozone will be just 0.8 percent this year, well off the May forecast of 1.2 percent, the group said. Japan’s economy won’t fare much better: The OECD said growth there will be 0.9 percent this year, down from a 1.2 percent forecast in May.
“The global economy is expanding unevenly, and at only a moderate rate,” said Rintaro Tamaki, the group’s acting chief economist and deputy secretary-general. “The continued failure to generate strong, balanced and inclusive growth underlines the urgency of undertaking ambitious reforms.”
The cut in the U.S. growth forecast was largely due to severe winter weather that caused a sharp economic contraction in the first three months of the year.
Noting a strong rebound in economic growth in the second quarter, it said the moderate recovery in the U.S. “remains broadly on track.”
“Employment gains are set to continue, with business investment likely to strengthen,” said the OECD, which is composed of the world’s 34 most-advanced economies.
But Europe remains a trouble spot. Slow growth there “is the most worrying feature of the projections,” the group said.
Economic growth in Germany, France and Italy has been disappointing, with low demand causing a concerning drop in inflation, the OECD said. It called for the European Central Bank to take more aggressive actions to stimulate growth.
On top of Europe’s problems, the OECD said rising geopolitical risks threatened economic growth. It noted that conflicts in Ukraine and the Middle East have intensified in recent months.
The referendum this week in Scotland, where voters will decide whether to leave the United Kingdom, also causes economic uncertainty, the OECD said.
Growth in China, the world’s top developing economy, will be 7.4 percent this year, the same as the OECD forecast in May.