OECD forecasts protracted economic slowdown in US, Europe

November 13th, 2008 - 7:39 pm ICT by IANS  

Paris, Nov 13 (DPA) The United States and the nations of the euro zone have entered an economic recession that will be long and could be severe, the Organization of Economic Cooperation and Development (OECD) said in a preliminary forecast released here Thursday.”Economic activity is expected to fall by 0.9 percent in the US next year, by 0.5 percent in the euro area and by 0.1 percent in Japan as OECD countries enter a protracted slowdown,” the OECD said.

According to the organization’s forecast, in the third quarter of this year the United States and the eurozone entered a period of four consecutive quarters of negative GDP growth. As a result, these two economies and that of Japan will actually shrink in 2009.

The US economy will contract by 0.9 percent next year, while eurozone GDP will shrink by 0.5 percent and that of Japan by 0.1 percent, the OECD said.

GDP for all 30 OECD nations is seen to decline by about 0.3 percent on the average next year.

Presenting the report, OECD director of economic policy studies Jorgen Elmeskov told journalists in Paris, “There will be a gradual recovery starting in the second half of 2009,” but economic growth will not approach normal until the second half of 2010.

“In the meantime,” he said, “unemployment will be significantly higher.”

For the United States, unemployment is foreseen to grow from 5.7 percent this year to a high of 7.6 percent in the first quarter of 2010. Euro-zone joblessness will rise from 7.4 percent to as high as 9.1 percent in 2010. In Japan, unemployment will top out at 4.4 percent, the OECD said.

The projections are accompanied by risks, particularly on the down side, the organization cautioned.

“They include, among others, a longer period than assumed before financial conditions normalise, further failures of financial institution and emerging market economies being hit harder by the downturn in global trade and a risk of reassessment by foreign
investors,” it said.

The OECD said that there may be a need for further measures to stabilize financial markets.

“In this event, international cooperation is desirable to avoid measures that distort competition or which effectively shift the problem to other countries,” the report said.

In a note of caution apparently targeting the G20 leaders meeting Saturday in Washington, Elmeskov said, “The crisis was the result of the failure of financial policies. But there is a danger of regulatory backlash. That could be very detrimental.”

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