OECD flags emerging economies against slowing growth next year

MANILA, Philippines - Emerging market economies will likely continue to be hit by slowing growth until next year and “many” are in need of policy actions to counter global adverse shocks, the Organization for Economic Cooperation and Development (OECD) said.

“Over-all continued policy stimulus is warranted to support global demand, but policy needs differ by country,” the OECD said on its Interim Economic Outlook released Tuesday.

“Recovery has progressed well in some advanced economies while demand is weakening in many EMEs,” it added.

The OECD did not provide specific forecasts for the region but pointed out that the emerging market outlook is “clouded by important uncertainties.”

Topping the list is the expected rise in interest rates in the developed markets, particularly the US. The US Federal Reserve, however, deferred raising interest rates last Thursday.

Another key concern is the “sharper-than-expected” economic slowdown of export-driven China, the world’s second largest economy, which could dent demand for emerging market products.

Europe also continues to be a concern, the OECD said, pointing to the possible “intensification” of the financial crisis yet to be resolved since 2008.

“Financial conditions have deteriorated in some EMEs. Especially among commodity exporters, the worsening of the terms of trade has been associated with weakening currencies. In addition, most equity markets were caught up in the August turmoil,” the OECD noted.

Financial markets plummeted across emerging Asia after China devalued the yuan in what was seen as a sign of continued weakness of Beijing.

Given the risks, the OECD suggested that developing markets should continue to pursue policies that will “support demand over-all” to counter financial instability and “revive” economic growth.

“Many EMEs are experiencing weaker external demand growth and more difficult and volatile financial conditions, and these pressures may increase,” the group of developed nations said.

“Monetary and fiscal policies should be supportive of activity, and due attention should be paid to fiscal choices that support sustainable growth” it added.