The Organization for Economic Cooperation and Developmentforecasts global economic growth will accelerate in 2014, with boththe U.S. and Japan continuing to outpace the euro area.

“The global economy is moving forward and it is doing so atmultiple speeds,” OECD Chief Economist Pier Carlo Padoan said inthe Paris-based organization's semi-annual Economic Outlook.Differing monetary and fiscal choices across the major developedeconomies are driving regional divergence with “each path carryingits own mix of risks,” he said.

Global central banks are continuing to try to bolster theireconomies, with the Federal Reserve buying $85 billion of debt amonth and the Bank of Japan unveiling unprecedented stimulus lastmonth. In the euro region, where the European Central Bank cut itsbenchmark rate to a record low this month, the OECD said, “more canbe done through further non-conventional measures.”

The OECD sees U.S. gross domestic product rising 1.9 percentthis year and 2.8 percent in 2014, while Japan's will increase 1.6percent and 1.4 percent. The euro-area economy will shrink 0.6percent this year before expanding 1.1 percent next, according tothe report.

In a separate release yesterday, German unemployment rose morethan economists forecast in May as the euro-region debt crisis anda long winter took their toll on Europe's largest economy. Thenumber of people out of work climbed 21,000 to 2.96 million.Economists predicted an increase of 5,000, according to the medianof 35 estimates in a Bloomberg News survey.

Some Optimism

The OECD, which advises its 34 member governments on economicpolicy, sounded a more optimistic note than in recent reports,praising the U.S. for having “repaired” its financial system,welcoming Japan's shift to a more stimulative monetary policy andnoting that public debt levels in many euro-area countries willsoon start to decline given the fiscal effort made over “severalyears.”

Combined growth across OECD countries will accelerate to 2.3percent next year from 1.2 percent this year. China, which isn't amember of the OECD, will expand 8.4 percent in 2014 after growth of7.8 percent this year, according to the report.

Still, Padoan warned of risks related to the 17-nation currencyzone, saying that rising unemployment is the “most pressingchallenge” and that countries in the region with trade surplusessuch as Germany need to allow wages to rise.

The euro-region jobless rate probably rose to 12.2 percent inApril from 12.1 percent in March, economists said before a reporton May 31.

'Reform Fatigue'

“Protracted weakness could evolve into stagnation with negativeimplications for the global economy,” he said. “Reform fatigue ismounting as visible results in growth and jobs fail tomaterialize.”

For the U.S., the challenge will be how to unwind stimulus. FedChairman Ben S. Bernanke and some colleagues disagree about when tocurtail bond buying, with Bernanke stressing this month that apremature exit risks hampering growth.

The OECD said an early withdrawal by the Fed “could jeopardizethe fragile recovery, but waiting too long could result in adisorderly exit from the program.”

Speaking more broadly, Padoan said protracted monetary easing“may lead to excessive risk taking, bubbles, and resourcemisallocation.”

“Exit from unconventional monetary policy, when needed, may bedifficult to manage and less smooth than desirable, possiblyleading to sharp rises in bond yields and serious negativeconsequences for growth,” he said.

In Asia today, the Bank of Thailand cut its benchmark interestrate for the first time this year as slowing economic growthbolstered government calls for easing. The one-day bond repurchaserate fell by a quarter of a percentage point to 2.5 percent. Inreports elsewhere, Japan's retail sales fell 0.1 percent in Aprilfrom a year earlier, while South Korea had a current accountsurplus of $3.97 billion last month.

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