OECD: Recession a possibility without action on cliff, Europe

Policymakers need to act to ensure that economies around the world don’t dip back into a recession, a key economic group said Tuesday.

The Organization for Economic Cooperation and Development said in its latest economic outlook that it expects economic growth across its membership to rise by 1.4 percent in 2013, and that gross domestic product in the U.S. will rise 2 percent next year.

That projection assumes that the U.S. economy does not go over the so-called “fiscal cliff,” the combination of spending cuts and tax increases set to go in place early next year. 

The OECD, a Paris-based group with almost three dozen members, also said that the cliff and continued uncertainty in Europe showed that the world economy was not on safe ground.

“The US ‘fiscal cliff’, if it materializes, could tip an already weak economy into recession, while failure to solve the euro area crisis could lead to a major financial shock and global downturn,” said Angel Gurría, the OECD’s secretary-general.

“Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the United States, in Europe, and elsewhere.”

The OECD also projected that growth would accelerate in 2014, up to 2.3 percent across the organization and 2.8 percent in the United States.

Earlier this year, the OECD had projected more robust growth in both the U.S. and in the organization in 2013.

The OECD report comes as international creditors reached an aid agreement for Greece, after weeks of starts and stops. 

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