THE Organization for Economic Cooperation and Development urged Group of 20 governments and central banks to "act decisively" to restore confidence as it cut its growth forecasts for the United States and the euro area.

The US economy, the world's largest, will expand 1.7 percent this year and 1.8 percent next, the Paris-based organization said in a report yesterday. In May, it forecast US growth of 2.6 percent and 3.1 percent respectively. The euro area economy may grow 1.6 percent in 2011 and 0.3 percent in 2012 instead of a previously predicted 2 percent in each.

Yesterday's forecasts underline the challenges facing G20 leaders before they gather in Cannes, France, later this week to seek a coordinated response to a cooling global economy and Europe's spreading sovereign debt crisis. The OECD, which advises member governments on economic policy, said yesterday that growth has been undermined by poor policies.

"Much of the current weakness is due to a generalized loss of confidence in the ability of policy makers to put in place appropriate responses," the OECD said. The G20 should "act decisively to restore confidence" and "the outlook will likely be better than anticipated if comprehensive action is taken."

Central banks in developed nations should keep interest rates on hold or cut them "where possible," the OECD said. G20 economies as a whole will grow 3.9 percent this year and 3.8 percent in 2012, it said.

Key to global growth prospects is the outlook for the euro area, where leaders agreed last Thursday to raise the size of their bailout fund to 1 trillion euros (US$1.4 trillion) and write down Greek debt by 50 percent. The OECD urged the region's leaders to put their plan into action "promptly and forcefully."

Source:shanghaidaily