Growth lags in developing economies

Jim Puzzanghera / Los Angeles Times /

Published Sep 4, 2013 at 05:00AM

WASHINGTON — Growth picked up in the second quarter in the U.S., Europe and other major advanced economies but has slowed in China and other key emerging nations, which will lead to sluggish global output, the Organization for Economic Cooperation and Development said Tuesday.

Concerns about a pullback on stimulus efforts by the Federal Reserve has triggered financial market turbulence in emerging economies such as India and Indonesia and fueled currency depreciation and an outflow of capital because of rising borrowing costs, the group said in a new report.

Consequently, the boost that emerging nations have given to the global economy will be reduced in coming months, and growth will be uneven, the report said.

“The gradual pick-up in momentum in the advanced economies is encouraging, but a sustainable recovery is not yet firmly established,” said Jorgen Elmeskov, deputy chief economist of the OECD.

The group’s 34 member nations have the world’s most advanced economies.

Elmeskov warned that the economy in Europe, which is emerging from recession, is still vulnerable to financial shocks, and that the global economy could take a hit if there is a standoff in the U.S. over the federal budget or raising the nation’s debt limit.

But the report said it would be appropriate for the Fed to “gradually reduce” the size of its monthly bond purchases as long as it continued to keep short-term interest rates at their near-zero level.

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