The world's biggest economies are slowly recovering from a late 2012 slowdown, with Japan and the United States leading the way ahead of a struggling, two-speed eurozone, the OECD said in a near-term of assessment of G7 nations on Thursday.

Emerging economies were tipped to remain by far the strongest growth performers, with China expected to expand by well more than 8.0 percent in the first half of 2013, the Organization for Economic Development and Cooperation said.

The OECD forecast that the full Group of Seven (G7) most industrialised economies, which does not include China, will grow by 2.4 percent in the first quarter of this year on an annualised basis and by 1.8 percent in the second.

Forecasts remain very uncertain however, the OECD added, with new-found buoyancy on financial markets yet to feed through to the wider economy.

Accordingly, the need for monetary stimulus from central banks remained "a key instrument for supporting demand" even though results could be insufficient and despite the dangers.

An expansionary monetary policy "should remain in place for now and in some case be pursued further", the OECD said.

The Paris-based organisation said that although downside risks to growth were eased last year after the US took action to face its fiscal cliff debacle and the European Central Bank (ECB) pledged support for troubled eurozone economies, "real activity has yet to reflect fully the improvement" seen on the financial markets "especially in the euro area."

"This highlights the risk of asset prices getting out of line with fundamentals, especially as regard to corporate securities," the report said.

The eurozone economy is experiencing a divergence, the OECD said, with Germany "likely to pick up strongly over the first two quarters of 2013" and the economies of other member nations such as France and Italy remaining "slow or negative".

It said that existing commitments to reduce budget deficits should be met, but did not encourage eurozone countries to make further spending cuts and tax hikes given the slower-than-expected economic growth.

"Many of the countries are currently in recession, the nominal deficit reduction targets cannot be met in the short term," OECD Chief Economist Pier Carlo Padoan told AFP.

They should nonetheless continue to reduce structural deficits, he said, as stable public finances and increased competitiveness would provide the basis for recovery.

The OECD meanwhile said that new anti-deflationary policies in Japan would help the nation accelerate from "low levels".

A breakdown of the 2013 growth estimates suggested that the United States would lead the G7 pack, expanding by 3.5 percent in the January to March period and by 2.0 percent from April to June.

Japanese business activity was tipped to expand by 3.2 percent in the first three months of the year, and by 2.2 percent in the second quarter.

Crisis-hit Italy is expected to perform the worst, contracting by 1.6 percent in the first quarter and by 1.0 percent in the second, the OECD said.

France would contract in the first quarter by 0.6 percent, officially putting it in recession after also contracting the previous quarter, but recover with an expansion of 0.5 percent in the second quarter of 2013.

Germany meanwhile should sharply outpace its eurozone partners, growing by 2.3 percent in the first quarter and 2.6 percent in the second.

World trade, which had slowed in 2012, should grow again in this year in line with economic growth, the OECD said.

channelnewsasia.com