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Last updated: March 28, 2013 10:33 am
A meaningful recovery will elude the eurozone until at least the second half of this year, the Organisation for Economic Co-operation and Development said on Thursday.
The Paris-based multilateral body whose members are mostly developed nations also warned of the risk of asset-price bubbles emerging in the currency bloc. The surge in equity and bond prices across the G7 is, as yet, unjustified by countries’ economic performance.
“Real activity has yet to reflect fully the improvement in financial market sentiment, especially in the euro area. This highlights the risk of asset prices getting out of line with fundamentals, especially as regards corporate securities,” Pier Carlo Padoan, chief economist at the OECD.
The currency bloc has not seen economic growth since the second half of 2011.
The eurozone recession deepened in the final quarter of last year, with the 17 countries that make up the bloc’s economy shrinking by 0.6 per cent overall over the course of the three months. The European Commission expects the bloc’s economy to contract in 2013.
In its interim economic assessment, the OECD forecast a renewed divergence between growth in Germany and the rest of the bloc.
The OECD expects the three largest eurozone economies – Germany, France and Italy – to avoid an outright contraction, growing by an annualised rate of 0.4 per cent in the first quarter and 1 per cent in the three months to June.
But this is only because of the relatively strong performance of Germany, the region’s economic powerhouse, which the OECD expects to expand by 2.3 per cent in the first quarter and 2.6 per cent in the second.
The region’s second and third-largest economies will shrink over the first half of the year. The French economy will contract in the first quarter of this year by 0.6 per cent before growing by 0.5 per cent, while Italy’s economy is expected to shrink in the first and the second quarters by 1.6 per cent and 1 per cent respectively.
The UK should avoid a triple-dip recession, growing by 0.5 per cent in the first quarter of 2013 and by 1.4 per cent in the following three months.
The US and Japan will return to moderate growth. The world’s largest economy is forecast to grow by 3.5 per cent and 2 per cent in the first and second quarters of 2013. Japan’s economy is likely to grow by 3.2 per cent and 2.2 per cent.
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