OECD raises forecast for U.S. economic growth for 2011, cuts projections on China

05/25/2011 6:25 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Newsflash: The United States and Japan must come up with plans to reduce their budget deficits, the Organization for Economic Cooperation and Development (OECD) said in its annual economic outlook published today, May 25.


That’s about as alarmist as the developed world’s economic think tank got. The organization (sorry “organisation”) kept its forecast for global economic growth at 4.2% for 2011 and 4.6% in 2012. And, despite its deficit warning, the OECD raised its forecast for U.S. economic growth to 2.6% in 2011. That’s up from 2.2% in its November 2010 forecast. It left its 2012 forecast at 2.2%.

“The global recovery is becoming self-sustaining and more broad based,” chief economist Pier Carlo Padoan wrote in the annual outlook.

The U.S. budget deficit for the fiscal year that ends on September 30, 2011 is now forecast at 10.9% of U.S. GDP, according to the U.S. Treasury. That would bring U.S. government debt to 101% of GDP, the OECD calculates.

In Japan the debt load will rise to 213% of GDP at the end of 2011. The OECD forecasts that the tsunami and earthquake damaged Japanese economy will contract by 0.9% in 2011 and grow by 2.2% in 2012.

Surprisingly perhaps, the debt burden in the 17-national European Monetary Union doesn’t lag that far behind U.S. levels. The Eurozone debt load will climb to 96% of GDP in 2011. The organization raised its forecast for Eurozone growth to 2% for 2011, from its November forecast of 1.7%, and maintained its 2011 forecast at 2%.

In line with recent cuts in growth projections from big global banks, the OECD lowered its forecast for GDP growth in China to 9% from the 10% it had predicted in November.

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