By MARY PATRICK
The global economy in developed countries is on track to improve in the coming year, although central banks will need to continue loose monetary policies that are encouraging borrowing, according to the Organization for Economic Co-operation and Development (OECD).
However, the global organization warned that in addition to the need for the banks to continue encouraging growth, emerging markets could also drag the global economy down, according to an article from CNN Money.
On the plus side, the OECD’s latest report projects that economies in France, Germany and Great Britain will grow at a rate faster than previously believed. For example, the report predicted that France’s economy will grow by .3%, this year even though previously many had projected a contraction.
In the United Kingdom, the OECD report calls for a 1.5% growth while in Germany that project is for .7% growth. The United Kingdom estimate is nearly double that of the previous estimate in May.
OECD also projects that the United States economy will continue to grow by about 1.7%. Japan also is expected to grow by 1.6%, according to CNN Money.
While the outlook for established economies was generally good, the OECD warned that some emerging economies could provide a drag on the overall global picture, causing overall sluggish growth.
The report stated, “While the improvement in growth momentum in [major developed] economies is welcome, a sustainable recovery is not yet firmly established and important risks remain.”
Central banks in many countries are engaged in aggressive monetary policies such as the $85 billion-a-month bond buying program by the Federal Reserve in the United States. Such policies will likely need to continue for the global economy to continue growth, according to the OECD.
The OECD report said while the proposal to scale back the U.S. bond-buying program may work, the European Central Bank may need to take more action if the European economy flags.
The OECD report points out that many of the emerging economies could be hindered by debt. Many of these countries import more goods than they export, which means they rely heavily on currency from other nations.
Those countries that are currently experiencing the highest levels of deficits include India, Indonesia and Brazil.
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