China, Japan and North America will pull the global economy forward over the next two years despite headwinds thrown up by high oil prices and tenacious deficits, the OECD said Tuesday. The OECD forecast economic growth of 2.9 percent in 2005 for its 30 member countries, not including China, down from 3.6 percent this year. But it warned that in Japan momentum was likely to be halved next year, when the economy is projected to expand slightly more than two percent after four percent in 2004.
In general, according to the OECD, threats to what should be continuing, gradual economic expansion were posed by volatile oil prices, a surge in the euro against the dollar and fiscal and trade imbalances.
Overal growth in the Organisation for Economic Co-operation and Development should pick up to 3.1 percent in 2006, the OECD said in its twice-yearly economic outlook.
It predicted that an ongoing economic recovery "will benefit from continued Asian dynamism".
The study pointed in particular to China, which is not an OECD member but "where activity accelerated in the third quarter, following a desirable slowdown during the first half of the year."
Chinese growth was forecast to slow to eight percent in 2005 from 9.1 percent this year, reflecting higher oil prices and government tightening measures, before rebounding to 8.5 percent in 2006.
But at the same time, the impact of the government's policies and costlier oil on economic growth were expected to be offset by increasing investment in the power generation sector, strong demand for real estate, rising rural incomes and buoyant demand for Chinese exports.
Despite an expected slowdown in Japan, the country's "economic expansion remains on track", according to the OECD, which cited weaker export growth as a constraint on activity.
The report said "positive developments" could be expected in North America, where the US economy should show growth of 3.6 percent this year, 2.9 percent in 2005 and 3.1 percent in 2006.
The OECD forecast came as the Bush administration announced that the economy expanded at a 3.9 percent annual pace in the third quarter, stronger than had been previously estimated.
The report found that recovery in the eurozone was meanwhile battling higher oil prices and a rising euro as monetary union had so far failed to spur sustained economic dynamism in the 12 nations using the single European currency.
But OECD nonetheless predicted that in response to robust global trade eurozone gross domestic product would rise from 1.8 percent this year to 1.9 percent in 2005 and a healthy 2.5 percent a year later.
The OECD devoted a separate chapter to oil prices, which it warned were likely to remain at higher levels than in the past.
"Future oil prices will crucially depend on further progress in energy conservation in emerging economies as well as the United States," the report said.
In the foreword to the report, OECD chief economist Jean-Philippe Cotis said there were still resources on the supply side, particularly among Opec producers, to match increasing demand for oil, adding that the efficiency of existing facilities could be improved and that alternative sources of energy might become profitable at current prices.
"This does not mean, however, that oil prices will quickly fall back to the low levels which prevailed three or four years ago," Cotis warned.
At a press conference here Cotis predicted that the depreciation of the dollar, which has unnerved eurozone leaders who see the trend as threat to the competitiveness of their exports, was inevitable in light of a huge US current deficit.
The OECD is projecting that the US current account deficit will reach 6.2 percent of gross domestic product next year.
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