The world’s developed countries are probably heading for the worst recession since the early 1980s, according to the Organisation for Economic Co-operation and Development. In the latest edition of its economic outlook, the Paris-based think-tank painted a continuing gloomy picture of little growth this year. 2009 will be a year of contraction in America and the eurozone – their forecast of 0.6 per cent is slightly worse than the projection made earlier in the month before the G20 meeting in Washington.
And by 2010, they reckon growth will be positive again, but the potential for misery in the interim is considerable. OECD Chief Economist Klaus Schmidt-Hebbel said: “As a result of the recession the number of unemployed people will rise by something close to eight-million people, as tighter financial conditions, very low income-growth, and negative wealth effects, again due to lower equity prices and house prices, will dampen consumption and will also reduce significant investment.” The report makes no bones of the fact that many of the OECD’s economies are either in, or on the verge of, a protracted recession, and the report calls for more injections of support from governments and central banks. Britain has already announced a multi-billion euro package of borrowing and VAT cuts which many see as an enormous gamble. In Washington, latest figures show the US economy shrank in the third quarter more severely than was estinmated at first, with consumers cutting their spending at the steepest rate for 28 years. But the OECD has warned that their forecasts are surrounded by exceptionally large uncertainties, mainly the assumption of just how quickkly the global financial market crisis is overcome.