Slowdown in emerging markets to hit global growth: OECD

Slowdown in some large emerging economies, including India, will lead to sluggish global economic growth in the near term, notwithstanding improved prospects in the developed world, Paris-based think-tank OECD said on Tuesday.

‘Moderate recovery’ is under way in most of the major advanced economies including Japan and the United Kingdom, said the Organisation for Economic Co-operation and Development.

Growth has slowed in some of the large emerging economies, its interim economic assessment report added. "One factor has been a rise in global bond yields -- triggered in part by an expected scaling back of the US Federal Reserve's quantitative easing -- which has fuelled market instability and capital outflows in a number of major emerging economies, such as India and Indonesia.

"Since they now account for a large share of the world economy, the slowdown in the emerging economies points to sluggish near-term growth globally, despite the pick-up in advanced economies," OECD said.

The assessment comes at a time when the Indian economy is grappling with challenging times.

The rupee is plumbing new depths and economic growth has slumped to 4.4 per cent for the 2013 April-June quarter, the weakest performance since 2009.

The think-tank said said that moderate recovery is under way in the major advanced economies.

"Growth is proceeding at encouraging rates in North America, Japan and the UK. The euro area as a whole is out of recession, although output remains weak in a number of countries," it noted.

OECD has projected a growth rate of about 2.5 per cent for the US, Japan and Germany, in the third and fourth quarters of this year.

"GDP growth in China is forecast to pick up to about 8 per cent by the final quarter, after a slowdown in the first half of 2013.

“Even that would represent a slower rate than in recent years, however," the report said. Noting that major risks remain, OECD Deputy Chief Economist Jorgen Elmeskov said high levels of debt in some emerging markets have increased their vulnerability to financial shocks.

"And a renewal of brinkmanship over fiscal policy in the US could weaken confidence and trigger new episodes of financial turmoil," he cautioned.

OECD is a grouping of mostly developed nations.