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Clouds over emerging markets, Ukraine halt growth: OECD

PARIS -- Setbacks for emerging markets and rising risks of fallout from the Ukraine crisis are holding back the global economic recovery, the OECD said on Tuesday.

The global economy is now set to grow by 3.4 percent this year, it forecast, trimming its outlook by 0.2 points.

The organization held its forecast that the world economy would grow by 3.9 percent next year.

Central banks, including the European Central Bank, must go on shoring up growth, the Organisation for Economic Cooperation and Development said.

And governments should beware of pushing too fast to straighten out their finances.

The OECD said the events in Ukraine had increased geopolitical uncertainty, “with the downside risk that this could have a significant adverse impact on growth, especially in many Central and Eastern European economies.”

“The near-term outlook is for global activity and world trade to strengthen gradually through the rest of this year and 2015,” it said in its semi-annual Economic Outlook report.

“However, still-high unemployment in many countries and the subdued pace of growth in many emerging market economies relative to past norms are likely to limit the momentum of the recovery,” said the OECD.

Although the eurozone has perked up, the OECD trimmed its forecasts for U.S. growth after a bitter winter. Higher taxes in Japan and tighter credit conditions in China were also slowing growth.

The OECD raised its forecast for eurozone growth by 0.2 points to 1.2 percent this year, and sees growth accelerating to 1.7 percent in 2015.

It trimmed its U.S. growth forecast this year by 0.3 points to 2.6 percent this year due the harsh winter, but the OECD sees growth picking up throughout the rest of this year and rising to 3.5 percent in 2015.

It trimmed by 0.3 points its forecast for Japanese growth this year to 1.2 percent, and the OECD expects the same growth rate in 2015.

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