Economic News

LONDON (ShareCast) - The Organisation for Economic Cooperation and Development believes the global economy is near the bottom of the worst recession in 60 years, but that the recovery will be "weak and fragile".

It thinks the 30 countries that make up the OECD will shrink by 4.1% in 2009, although it's improved forecasts for next year to growth of 0.7% versus contraction of 0.1% previously.

But the outlook for Britain is more severe. OECD predictions have the UK contracting by 4.3% in 2009 and just flat next year.

That's more than the 3.9% decline forecast by the CBI earlier this month and much worse than the 3.5% expected by Chancellor Alistair Darling. He reckons the economy will grow 1.25% in 2010.

"It looks as if the worst scenario has been avoided and that OECD economies are now nearing the bottom," according to the OECD's latest Economic Outlook.

"Even if the subsequent recovery may be slow such an outcome is a major achievement of economic policy," it adds, although it will require "major policy efforts" to keep the recovery on track.

The OECD already sees signs of recovery in China thanks to huge monetary and fiscal stimuli, while US activity looks like bottoming during out the second half of this year.

But it fails to see "clearly visible" signs of impending recovery in the eurozone as the region struggles to get over bursting housing bubbles, export set-backs and damage to financial sectors. Rising unemployment also makes consumers more reluctant to spend.

Yesterday, the OECD said almost 20 million people will have lost their jobs in its 30 countries this year and next, taking the average unemployment rate close to 10% by the end of 2010.

It predicts 57 million will be out of a job in 18 months time versus 37.2 million at the end of 2008 when the unemployment rate was just 6.8%.