The global economy is expected to make a ‘hesitant and uneven’ recovery over the coming two years, with decisive action needed by both the US and European economies if recession is to be avoided, according to OECD’s latest Economic Outlook.


“The world economy is far from being out of the woods,” OECD Secretary-General Angel Gurría said during the Economic Outlook launch in Paris. “The US ‘fiscal cliff’, if it materialises, could tip an already weak economy into recession, while failure to solve the euro area crisis could lead to a major financial shock and global downturn.”


GDP growth in 2013 across the OECD is projected to match this year’s effort of 1.4 per cent, before gathering momentum to 2.3 per cent in 2014, according to the report.


In the United States, provided the “fiscal cliff” is avoided, GDP growth is projected at 2% in 2013 before rising to 2.8% in 2014. In Japan, GDP is expected to expand by 0.7% in 2013 and 0.8% in 2014. The euro area will remain in recession until early 2013, leading to a mild contraction in GDP of 0.1% next year, before growth picks up to 1.3% in 2014.


After softer-than-expected activity during 2012, growth has begun picking up in the emerging-market economies, with increasingly supportive monetary and fiscal policies offsetting the drag exerted by weak external demand. China is expected to grow at 8.5% in 2013 and 8.9% in 2014, while GDP is also expected to gather steam in the coming years in Brazil, India, Indonesia, Russia and South Africa.


Treasurer Wayne Swan said the Outlook was a ringing endorsement of the Australian economy, saying that it proves the country is holding onto strong growth despite ‘challenging global condions’.


“The Outlook confirms that, unlike most other OECD economies, Australia's economic fundamentals remain strong, with solid growth, low unemployment and contained inflation,” Mr Swan said.


The Outlook can be found here