RTTNews - Thursday, the Organization for Economic Co-operation and Development said the global recovery from the recession is likely to arrive earlier than expected. However, the pace of activity will remain weak well into next year.
According to the Paris-based OECD's latest Interim Economic Assessment, the unprecedented rate of deterioration in labor market situations seen over the last year should ease.
Nonetheless, numerous headwinds imply that the pace of the recovery is likely to be modest for some time to come, said, Jorgen Elmeskov, acting head of the think-tank's Economics Department.
As rising unemployment and weak housing markets dampen private demand, governments should continue to stimulate their economies. Considerable slack with the prospects of weak recovery implies that policy stimulus will continue to be required in the near-term. The current low interest rate should remain for the time being. On the fiscal front, the OECD said the announced stimulus measures should be implemented promptly.
Further, the OECD nations should prepare for the removal of the exceptional degree of support afforded by current monetary and fiscal policy stances. Preparing credible exit strategies and fiscal consolidation plans now, even if actual implementation will only commence later, is desirable, the report said.
The US economy is forecast to shrink 2.8% this year, unchanged from the previous estimate released on June 24. OECD sees GDP growth in the third and fourth quarters of 2009.
Meanwhile, economic contraction in the second largest economy, Japan, is seen at 5.6% compared to the previous estimate of 6.8%.
Eurozone GDP is expected to fall 3.9% versus previous estimate of a 4.8% decline. The decline forecast for Germany was upwardly revised to 4.8% from 6.1% and that for France to 2.1% from 3% for 2009.
The OECD report pointed to a gloomier situation in the UK. The agency revised the 2009 GDP contraction to 4.7% from 4.3% for this year.
There was an upward revision in G7 GDP outlook. Now, OECD estimates a 3.7% fall in G7 during 2009 compared to 4.1% decline estimated previously. The agency is estimating an annualized quarter-on-quarter 1.2% and 1.4% growth, respectively for the third and fourth quarters of 2009.
The report was released ahead of the the G-20 finance ministers' meeting in London starting Friday. In an interview with The Independent newspaper on Wednesday, UK's Chancellor Alistair Darling warned that complacency could lead the world economy into a double-dip recession.
Germany and France are expected to seek a discussion about strategies of exit from stimulus measures at the London meeting, a preliminary to the G-20 leaders' summit in Pittsburgh on September 24 and 25.
Darling urged governments to continue spending to pave the way for a sustainable recovery.
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