World economy set for sharp slump

Global growth is set for a sharp slowdown next year and the euro zone debt crisis “remains the greatest threat to the world economy at present,” the OECD said yesterday.
In its latest Economic Outlook, drafted before the euro zone and IMF unblocked almost 44 billion euros in emergency loans for Greece, the OECD also cautioned that “the risk of a new major contraction cannot be ruled out” after a global slump in 2009.
The organization slashed its outlook for the 34-member OECD area, which includes most of the world’s industrialized economies, in 2013 to 1.4 percent from a previously expected level of 2.2 percent.
On a global level, the OECD cut the 2012 growth forecast to 2.9 percent from 3.4 percent, and its estimate for 2013 to 3.4 percent from 4.2 percent. Another threat to business activity worldwide is a potentially catastrophic budget standoff in the US, where automatic tax increases and spending cuts are to take effect in January unless Democrat and Republican lawmakers can come to a compromise. The world’s economic fortunes thus hang next year in large part on the ability of leaders to deal with a crippling combination of unsustainable debt and cramped business activity.