The European Central Bank must implement stronger policies if it is to avoid a prolonged period of stagnation, and to prevent unintended effects to other economies, warned the Organization for Economic Co-operation and Development.
The eurozone is projected to grow 0.8% in 2014, 1.1% in 2015 and 1.7% in 2016, according to the OECD’s economic outlook, published Tuesday.
Global gross domestic product growth is projected to hit 3.3% this year, 3.7% in 2015 and 3.9% in 2016. However, any prolonged stagnation in the eurozone could threaten this growth.
“With the eurozone outlook weak and vulnerable to further bad news, a stronger policy response is needed, particularly to boost demand,” said Catherine L. Mann, chief economist at the OECD, in a statement published with the outlook. “That will mean more action by the European Central Bank and more supportive fiscal policy so that there is space for deeper structural reforms to take hold. A Europe that is doing poorly is bad news for everyone.”
The risk of stagnation in the eurozone is increasing, according to the outlook, while the U.S. is gaining strength. The U.S. economy is projected to grow 2.2% in 2014 and 3% each in 2015 and 2016.
Spokesmen at the OECD were not available to comment by press time.