PARIS — The outlook for economic growth in the United States and other major economies has brightened and should hit an annual rate of 3 percent in the first half of 2011, the OECD said Tuesday.
The Paris-based Organization for Economic Cooperation and Development says the improvement for six major economies – the U.S., Canada, Britain, Germany, France and Italy – is well above the organization's previous forecast thanks to increasing private investment and trade.
In November, the OECD forecast that the G-7 economies – which also include Japan – would grow at a 2 percent clip in 2011. The new forecast excludes Japan, as the OECD said it was too early to determine the full cost of damage from Japan's March 11 earthquake, tsunami and continuing nuclear disaster.
The improving economic outlook is the result of a combination of factors, OECD chief economist Pier Carlo Padoan said.
"The recovery is the result of a slow adjustment and exit from the recession. It is driven by stronger confidence in the private sector. It is driven by good financial conditions in the non-financial industries and the need to rebuild lost output. which was the result of the recession," Padoan said.
"But also it is driven by a new pick-up in world trade, which is coming as a consequence of strong growth of emerging economies," the economist added.
While the OECD said it is too early to calculate the cost of Japan's cascading series of disasters on the world's third largest economy, it said its first estimate is that growth in the first quarter may be reduced by between 0.2 and 0.6 percentage points. The impact could more than double in the second quarter, to between 0.5 and 1.4 percentage points, the OECD said, as the effects of lost production in hard-hit areas, power rationing and supply chain disruptions come into full force.
However, reconstruction efforts are likely to begin relatively quickly, the OECD said, which could begin to offset the negative GDP effects as early as the third quarter.
The OECD's previous forecast for Japan's growth this year was 1.7 percent.
The OECD new sees United States' growth of 3.1 percent in the first quarter and 3.4 percent in the second quarter. That's well above the OECD's last forecast of 2.1 percent and 2.5 percent growth for the periods.
Germany, the eurozone's largest economy, is set to expand at a rapid 3.7 percent clip in the first quarter, moderating to 2.3 percent in the second quarter, the OECD said.
Britain's economy will grow 3 percent in the first quarter and 1 percent in the second, the OECD said.
Unemployment rates that remain high and inflation rates that are creeping higher are the principle risks to the recovery, the OECD's Padoan said.
Instability in the Middle East and North Africa and the resulting possible further increase in the price of oil could also act as a drag on the world economy in the near term, the OECD said.
The European sovereign debt crisis in countries like Ireland, Greece and Portugal could also result in a more generalized rise in bond yields, the OECD warned.