A fragile global economic rebound is set to gather momentum next year, but debt in leading industrialized nations is expected to soar to record levels, the Organisation for Economic Co--operation and Development (OECD) said yesterday.
Average quarterly growth in OECD members should pick up from 1.75 percent at present to 2.5 percent in the second half of next year and 3.0 percent in the second half of 2012, the OECD said in its latest economic outlook.
“The global economic recovery remains fragile, but is broadly on track,” the OECD said in a report published ahead of a summit of G20 nations in Seoul later this month.
However, it warned that the economic crisis of the last two years had “pushed public deficits and debt to unsustainable levels.”
“Simply stabilizing debt relative to gross domestic product in most countries will require a historical consolidation effort of anywhere from 6.0 to 9.0 percent of GDP,” OECD Secretary--General Angel Gurria said. “But in fact even more is needed to bring debt back to sustainable levels.”
The study found that although growth in the industrialized world had slowed this year, reflecting a winding down in government stimulus measures, low interest rates and robust activity in emerging market countries means that “the present soft patch in ouput growth is not projected to persist for long.”
The OECD said that average growth in its members this year was expected to come to 2.5 percent to 3 percent, between 2 percent and 2 percent next year and 2.5 percent and 3 percent in 2012.
It forecast that while the growth in the US would be vigorous given the country’s strong ties to emerging markets, the rebound would likely be “more limited” in the eurozone and Japan.
The report cautioned that the forecasts could be upset by a renewed slide in housing prices, which would cut into consumption, and tension on foreign exchange markets, which could prompt protectionist pressures.
However, what emerged in the analysis as a more immediate threat was the state of public finances, which it said had “badly deteriorated.”
It said that even if debt-to-GDP ratios stabilized, they would remain “unacceptably high” in many countries, “exposing them to financial market volatility and reducing their fiscal space to counteract future economic downturns.”
The OECD stressed that reducing spending deficits is especially critical in light of renewed concern about sovereign debt, notably as a loss of confidence in a country’s capacity to shore up its public finances would increase borrowing costs.
That threat has been acute in parts of Europe this year, in such financially troubled countries as Greece, Spain, Portugal and Ireland.
However, the OECD found that the “sovereign debt turmoil” had abated in Europe with the creation of support arrangements by the EU and the IMF.
“These should be followed up with permanent mechanisms to detect the emergence of unsustainabilities [and] contain the risk of renewed sovereign debt stress,” the OECD said.
FALLING BEHIND: Samsung shares have declined more than 20 percent this year, as the world’s largest chipmaker struggles in key markets and plays catch-up to rival SK Hynix Samsung Electronics Co is laying off workers in Southeast Asia, Australia and New Zealand as part of a plan to reduce its global headcount by thousands of jobs, sources familiar with the situation said. The layoffs could affect about 10 percent of its workforces in those markets, although the numbers for each subsidiary might vary, said one of the sources, who asked not to be named because the matter is private. Job cuts are planned for other overseas subsidiaries and could reach 10 percent in certain markets, the source said. The South Korean company has about 147,000 in staff overseas, more than half
Taipei is today suspending its US$2.5 trillion stock market as Super Typhoon Krathon approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed-income trading, statements from its stock and currency exchanges said. Yesterday, schools and offices were closed in several cities and counties in southern and eastern Taiwan, including in the key industrial port city of Kaohsiung. Taiwan, which started canceling flights, ship sailings and some train services earlier this week, has wind and rain advisories in place for much of the island. It regularly experiences typhoons, and in July shut offices and schools as
An Indian factory producing iPhone components resumed work yesterday after a fire that halted production — the third blaze to disrupt Apple Inc’s local supply chain since the start of last year. Local industrial behemoth Tata Group’s plant in Tamil Nadu, which was shut down by the unexplained fire on Saturday, is a key linchpin of Apple’s nascent supply chain in the country. A spokesperson for subsidiary Tata Electronics Pvt yesterday said that the company would restart work in “many areas of the facility today.” “We’ve been working diligently since Saturday to support our team and to identify the cause of the fire,”
TECH PARTNERSHIP: The deal with Arizona-based Amkor would provide TSMC with advanced packing and test capacities, a requirement to serve US customers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is collaborating with Amkor Technology Inc to provide local advanced packaging and test capacities in Arizona to address customer requirements for geographical flexibility in chip manufacturing. As part of the agreement, TSMC, the world’s biggest contract chipmaker, would contract turnkey advanced packaging and test services from Amkor at their planned facility in Peoria, Arizona, a joint statement released yesterday said. TSMC would leverage these services to support its customers, particularly those using TSMC’s advanced wafer fabrication facilities in Phoenix, Arizona, it said. The companies would jointly define the specific packaging technologies, such as TSMC’s Integrated
RSS