ECONOMY

Documents & Texts from America.gov

31 March 2009
Group Forecasts Sharp Decline in World Economy

By Merle David Kellerhals Jr.
Staff Writer

Washington — Global economic activity will plummet by an average 4.3 percent this year, sending unemployment soaring past 10 percent while international trade falls by more than 13 percent, the Organisation for Economic Co-operation and Development (OECD) said March 31.

The Paris-based, 30-nation OECD said in its interim economic outlook that the global economy is in "the deepest and most widespread recession for more than 50 years. The global recession will worsen this year before a policy-induced recovery gradually builds momentum through 2010."

OECD Secretary-General Angel Gurría told G8 labor and employment ministers meeting in Rome that governments will have to take quick and decisive action to stop the current crisis from becoming "a fully blown social crisis with scarring effects on vulnerable workers and low-income households."

In the United States, economic activity will fall sharply in the near term, but the country could begin to pull out of the recession in early 2010, the OECD report said. That assessment corresponds with recent comments by U.S. Federal Reserve Chairman Benjamin Bernanke, who has said that if credit lending and loans by commercial banks begin flowing into the domestic economy this year, the recession could end by the first of next year.

"Restoring global growth is an economic and political priority, but also an ethical, moral, social and human imperative," Gurría said at the March 30 Rome meeting.

The OECD interim economic outlook comes two days before the leaders of the Group of 20 advanced and emerging market countries meet in London to resolve some of the thorny issues emanating from the current global recession. The world leaders, whose countries represent 85 percent of the global economy, will discuss further stimulus measures to jump-start economies, and regulatory reform of financial markets that would avoid this kind of crisis in the future.

President Obama, who left for London March 31, will present a four-part program at the G20 leaders' conference. The first step is putting in place a significant stimulus package to get growth going again, Michael Froman, deputy national security adviser for international economic affairs, said in a White House conference call March 28.

The president’s plan also involves repairing financial systems to get lending flowing; avoiding protectionism; and minimizing the spread of the crisis to emerging markets and developing countries, Froman said.

Froman said the United States is seeking to expand regulation to systemically important institutions, products and markets, which includes hedge funds; to create codes of conduct for offshore financial centers, also known as tax havens; to agree to reforms of the global financial system; and to push for greater cooperation among international regulators.

The OECD report also said that weak export markets, falling investment and a continuing credit crunch will hamper European activity "hard over the coming six months. The recovery will only begin to build momentum by the middle of 2010."

The report said the most dangerous risk is that the weakening economy will further undermine the health of financial institutions, which, in turn, would deepen the slump in economic activity.

The full text of the OECD interim report is available on the group’s Web site.

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