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OECD highlights euro zone debt crisis and US fiscal cliff as biggest threats to global economy

The Organization for Economic Co-operation and Development has lowered its growth forecasts for the global economy.

oecd eurozone debt crisis biggest threat global economyEnlarge
The Organization for Economic Co-operation and Development identified the eurozone debt crisis and the American fiscal cliff as the biggest threats to the global economy. (Sean Gallup/Getty Images)

The Organization for Economic Co-operation and Development has lowered its growth forecasts for the global economy, according to the BBC.

The group, which represents the world's richest nations, said its members' economies will only grow by 1.4 percent, rather than the earlier forecast of 2.2 percent.

The OECD highlighted the euro zone debt crisis and the American fiscal cliff as the biggest threats to the global economy.

"The world economy is far from being out of the woods," said the OECD's secretary general Angel Gurria, according to the BBC. "The US fiscal cliff, if it materializes, could tip an already weak economy into recession, while failure to solve the euro area debt crisis could lead to a major financial shock and global downturn."

"After five years of crisis, the global economy is weakening again," said the OECD's chief economist Pier Carlo Padoan, according to Bloomberg Businessweek.

More on GlobalPost: Greece: IMF, EU agree on new debt target

According to the OECD's new forecasts, the US GDP will rise 2.2 percent this year and 2.0 percent next year, down from earlier predictions of 2.4 percent and 2.6 percent in May. The euro area's economies will shrink 0.4 percent and 0.1 percent in the same periods, compared to the earlier predictions of 0.1 percent contraction and 0.9 percent growth forecasted in May.

While the more established economies will remain stagnant, in the OECD's forecast, countries like China, Brazil and India are expected to see growth pick up, according to the Associated Press.

The report came despite indications that the euro zone crisis might be improving. Earlier Tuesday, Greece secured more bailout cash, averting the fears of an imminent bankruptcy.

The OECD urged central banks in the euro zone, Japan, China and India to provide further stimulus, according to the Wall Street Journal. It also said governments should ease their budget cuts, which were hampering growth to a greater extent than expected.

The group advised that if the global economy does contract, central banks should cut their key interest rates and provide "quantitative easing," while countries running a trade surplus should provide temporary fiscal stimulus.

More on GlobalPost: Congress returns to tackle fiscal cliff

http://www.globalpost.com/dispatch/news/business/global-economy/121127/oecd-highlights-eurozone-debt-crisis-and-us-fiscal-clif