By Richard Johnstone | 3 September 2013

A ‘moderate’ economic recovery is underway across the major advanced economies, the Organisation for Economic Co-operation and Development has said today in its latest assessment of global growth.

Today’s Economic Assessment found economic output has been growing at encouraging rates in North America, Japan and the UK. The euro area as a whole is out of recession, the group added.

However, the report highlighted that output remains weak in other countries. Slower growth has been taking place in some large emerging economies, such as India and Indonesia, as a result of market instability following the US Federal Reserve’s scaling back of its quantitative easing programme.

The international body’s report also highlighted that public finances have been improving in most advanced economies, with the exception of Japan, but it also stated that reductions in government spending in many countries must continue. These should be ‘better designed’ to protect the most vulnerable in society and to allow structural economic reforms that could increase the number of jobs to take place.

The report also warned that, since emerging economies account for a large share of the world economy, their slowdown means that global growth will be sluggish in the short-term.

This is despite the upturn in the advanced economies, where growth is expected to continue at a similar pace in the second half of 2013 as in the second quarter.

In the three largest OECD economies, the US, Japan and Germany, economic activity is expected to expand by about 2.5%, on an annualised basis, in the third and fourth quarters. France is forecast to grow by about 1.5% annualised in the second half of the year, but the OECD also predicted Italy will remain in recession.

Gross domestic product growth in China is forecast to pick up to about 8%, a slower rate than in recent years.

Presenting the assessment in Paris, OECD deputy chief economist Jorgen Elmeskov said the momentum in the advanced economies is ‘encouraging’, but a sustainable recovery is not yet firmly established.

‘Major risks remain,’ he added. ‘The euro area is still vulnerable to renewed financial markets, banking and sovereign debt tensions. High levels of debt in some emerging markets have increased their vulnerability to financial shocks. And a renewal of brinksmanship over fiscal policy in the US could weaken confidence and trigger new episodes of financial turmoil.’

Elmeskov said that continued support for demand is still needed to make sure recovery takes hold, while many countries also need to implement structural reforms to boost growth, rebalance the global economy and avoid an increase in unemployment.