U.S. And Japan Driving G7 Recovery As Euro Zone Lags, OECD Says

Economic growth is rebounding in the United States and Japan while the euro zone is lagging behind, the OECD says in its latest forecast.

PARIS, FRANCE (MARCH 28, 2013) (REUTERS) - The United States and Japan are leading a rebound in advanced economies while the still fragile euro zone needs an interest rate cut to ensure a recovery takes hold, the OECD said on Thursday (March 28).

The outlook has finally strengthened for the Group of Seven economies, though it is still too soon for governments and central banks to drop exceptional measures to prop up growth, the Organisation for Economic Co-operation and Development said."It is an outlook which points at an improvement of the global economy especially in the United Statesand Japan, a bit less so in the euro area," said Paris Chief Economist Pier Carlo Padoan.

The OECD forecast that these major economies would grow on average 2.4 percent in the first quarter on an annualised basis, after shrinking 0.5 percent in the previous three months. Their growth pace would cool slightly in the second quarter to average 1.8 percent in the second quarter, the Paris-based organisation forecasts.

The United States, the world's biggest economy, was seen leading the pack with growth estimated to reach 3.5 percent in the first quarter, slowing to 2.0 percent in the following three months.

New measures to boost the Japanese economy would help it grow 3.2 percent in the first quarter and 2.2 percent in the second quarter.

However, growth rates diverged widely among the euro zone's biggest economies with Germany seen bouncing back after shrinking at the end of 2012 to grow 2.3 percent in the first quarter and 2.6 percent in the second quarter.

In contrast, France was seen emerging from recession only in the second quarter, with growth of 0.5 percent, while Italy would remain stuck in a long-running recession.

"In the euro area Germany is growing at a healthy rate, above 2 percent, which is good news butFrance, which is the second largest economy, will not be growing possibly at all in 2013, possibly start growing again in the latter part of this year and Italy continues to be in recession although this recession is shrinking which means that Italy might see positive growth at the end of 2013," Padoan said.

Padoan added that even though weak growth and low confidence were complicating efforts to bring down unemployment figures in Europe, progress was being made in tackling the crisis.

"There is underlying improvement in terms of fiscal consolidation making progress, and competitiveness improving significantly in the periphery which means that the basic imbalances of the euro crisis are being addressed," he said.