London: Stressing that growth is much slower than expected, think tank OECD on Thursday said recovery seems to have stalled in major developed nations, amid declining business confidence hurting global trade as well as employment.
Paris-based Organisation for Economic Cooperation and Development (OECD) – a grouping of mostly industrialized nations -- noted that monetary policies such as continuing with lower interest rates could be considered to boost overall recovery.
"Growth is turning out to be much slower than we thought three months ago, and the risk of hitting patches of negative growth going forward has gone up," OECD Chief Economist Pier Carlo Padoan said.
In its Interim Economic Assessment report released today, OECD said that economic recovery appears to have come close to a halt in the major industrialized economies.
Falling household and business confidence is adversely impacting both world trade and employment, it added.
"The debate over fiscal policy in the US, the sovereign debt crisis in some countries of the euro area and the fact that governments have fewer options to boost growth are driving both business and consumer confidence downward," the report noted.
OECD, whose members include the US, Germany and France, pointed out the risks of high unemployment getting entrenched are greater now.
As per the report, monetary policy responses to the crisis could include further central bank interventions in securities markets and strong commitments to keeping interest rates low over an extended period.
"Emerging market economies should withdraw monetary tightening if inflation is moving towards target. They should allow appreciation of effective exchange rates in cases where inflation is still high and the trade balance is widening," it noted.
India and many other emerging economies have embraced a hawkish monetary stance, as part of efforts to tackle rising inflationary pressure.
In recent weeks, global financial markets have taken a beating especially after rating agency S&P's move to strip the US of its coveted 'AAA' rating.