RTTNews - The Organization for Economic Co-operation and Development Wednesday upgraded the economic outlook for its 30 member countries. The Paris-based group said the slowdown in these economies is reaching its bottom, but recovery is likely to be weak and fragile.
In addition, the OECD warned that the economic and social damage caused by the crisis would last for a long time.
The 30-member area is forecast to see an economic contraction of 4.1% in 2009, revised from a 4.3% contraction estimated in March. This represented the organization's first upgraded projections in two years.
OECD revised GDP projections upward for most of the large emerging economies and the U.S. However, the prospects for the euro area worsened for this year.
The next few months will be equally testing, Angel Gurría, Secretary-General of the OECD, said. There needs to be a clear and credible plan and timeline for phasing out the emergency measures as the recovery takes hold.
Gurría added, It is critical to consider these exit strategies now in order to prevent new risks in the years ahead.
U.S. economic activity is forecast to fall 2.8% in 2009 compared to a 4% decline projected in March. Growth in 2010 is seen at 0.9%, better than a zero percent growth estimated earlier. The recovery would not be strong enough to stop unemployment rising to near 10% over the coming two years.
While, Japan is estimated to drop 6.8% in 2009 and to rise 0.7% in 2010. This compares to a 6.6% fall projected in March for this year and 0.5% decline next year. OECD sees slow recovery in Japan and said deflation would possibly become further entrenched.
OECD finds no clear visible signs of recovery in the euro area. Euro area GDP is expected to contract 4.8% this year and to show no growth in 2010. The previous projections were for a 4.1% fall in 2009 and a 0.3% fall in 2010. As increasing unemployment impair consumer spending, the eventual recovery is likely to be slow, the organization predicted.
Among the major euro area economies, the annual decline in Germany is projected to amount to around 6% this year. Going forward, activity will slowly pick up in the course of 2010. Meanwhile, France is forecast to shrink around 3% in 2009 and Italy to fall 5.5%.
For the British economy, OECD estimates a 4.3% contraction in 2009 and sees recovery only mildly in 2010. The jobless rate is projected to climb towards 10% next year with inflation well below the 2% target for an extended period.
OECD expects around 0.5% fall in Australia and 3% decline for New Zealand in 2009. Major policy stimulus should contribute to modest positive growth next year in New Zealand, the report said, while it emphasized the Australian government should continue reforms of infrastructure regulations.
The OECD assessed a strong rebound in the Chinese economy from the slowdown in the autumn of 2008 due to the monetary and fiscal stimuli. Real GDP is expected to rise 7.7% this year, followed by a 9.3% expansion in 2010. At the same time, OECD sees a slowdown in India's long economic upswing. Growth is seen at 5.9% in 2009 and 7.2% next year.
According to the Economic Outlook report, the global crisis pushed South Africa into recession. OECD sees 2% decline in 2009 GDP and expects recovery next year. OECD said the inflation targeting regime should be left in place.
Regarding inflation, the OECD said the weakness is product and labor market is likely to add downward pressure on inflation. But, its disinflationary impact may be limited and most economies are projected to stay clear of sustained deflation.
For comments and feedback: contact email@example.com