Business

OECD slashes US forecast as gives global economy B minus

New York's Central Park in March Image copyright Getty Images
Image caption The OECD said bad weather at the start of the year had hit its US growth forecast

The OECD has slashed its US growth forecast for this year and next and given the global economy a "B minus" in its bi-annual assessment.

The think-tank expects the US economy to grow just by 2% this year and 2.8% next, down from its November forecast of 3.1% and 3% respectively.

It blamed the cut on "transitory disruptions", including a strong dollar and bad weather early in the year.

It also cut its global growth forecasts for both this year and next.

The Organisation for Economic Cooperation and Development expects the world economy to grow 3.1% this year and 3.8% in 2016, down from its prediction six months ago of 3.6% and 3.9% growth respectively.

It blamed the cut on an unexpectedly weak first quarter, with world growth its lowest since the financial crisis.

"The global economy is expected to strengthen, but the pace of recovery remains weak and investment has yet to take off," OECD secretary-general Angel Gurria said.

'Unwilling to spend'

Overall, the OECD said the economy's "B minus" grade equated to just "muddling through".

And it said to accelerate world growth, both businesses and government needed to invest more.

"By and large, firms have been unwilling to spend on plant, equipment, technology and services as vigorously as they have done in previous cyclical recoveries," it said.

The OECD said many governments had also delayed investing in infrastructure, negatively affecting jobs and living standards.

The think-tank also expects China to grow more slowly than it last predicted in November, expanding 6.8% this year rather than 7.1%.

But the OECD hiked its growth forecasts for the eurozone economy, crediting bolder-than-expected monetary easting by the European Central Bank for the increase.

It now expects growth in the euro area to rise by 1.4% this year and 2.1% in 2016, up from 1.1% and 1.7% respectively.

Overall the OECD said the global recovery since the 2008 economic and financial crisis had been "unusually weak".

"To move from a 'B-minus' grade to an 'A' means boosting investment in order to create jobs and stimulate consumption," said OECD chief economist Catherine Mann.

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