Paris: The deepest global recession in over 60 years is close to bottoming out, but recovery will be weak unless governments take further action to remove uncertainty over banks’ balance sheets, the Organization for Economic Cooperation and Development (OECD) said Wednesday.
In its half-yearly economic outlook, the Paris-based organization said it expects its member countries’ economies to shrink by 4.1% this year, with only government rescue measures heading off an even worse decline.
But the recovery “is likely to be both weak and fragile for some time,” Jorgen Elmeskov, the OECD’s acting economics department head, said in comments accompanying the report.
The OECD now expects the US economy to shrink by 2.8% this year compared to 1.1% growth in 2008. Japanese output is likely to contract by 6.8% this year and the 16 nation euro-zone will likely shrink by 4.8%.
The OECD forecast a return to growth in all three regions next year, with overall growth across its membership expected to average 0.7% in 2010, according to the report.
World economic growth, which the OECD defines as its members plus Brazil, Russia, India and China, will rebound to 2.3% next year from a decline of 2.2 percent in 2009, according to the latest OECD forecast.
The speed of an economic rebound will vary across the globe. China already seems to be recovering, but in the U.S. the fading of fiscal stimulus measures and the continued need to repair banks’ balance sheets means recovery there “could be uncharacteristically weak and insufficient” to offset unemployment of around 10 percent, the OECD said.
Recovery may also be slow in the euro-zone, the OECD said, as rising unemployment weighs on consumer spending.
The OECD urged countries to both start devising their “post-crisis policy strategies” to roll back their stimulus measures, while also continuing with measures “to ensure a faster and more robust recovery.”
Countries that have not already acted to remove uncertainty over their banks’ balance sheets need to do so, while stress testing of banks should be employed to restore confidence, the OECD said.