OECD Sees Worst Recession Since 1980s

By Pan Pylas

LONDON -- The financial crisis will likely push the world's developed countries into their worst recession since the early 1980s, the Organization for Economic Cooperation and Development said Tuesday.

In its half-yearly economic outlook, the Paris-based organization said economic output will likely shrink by 0.4% in 2009 for the 30 market democracies that make up its membership, against the 1.4% growth prediction for 2008. As a result, the OECD said it supported fiscal rescue measures, including tax cuts, provided they were targeted and temporary.

The OECD said the number of unemployed across its members could rise by 8 million over the next two years and that there is a risk, "albeit small," that some countries will experience deflation, or falling prices.

The OECD said the U.S. was likely to contract by 0.9% in 2009 following a 1.4% expansion this year. Japanese output is only expected to contract by 0.1% in 2009 following 0.5% growth this year, while the 15-nation euro-zone will likely shrink by 0.6% next year after 1.0% growth this year.

The OECD's latest 2009 projections for the world's leading three economic areas are more or less the same as the preliminary forecasts made earlier this month ahead of the G-20 meeting of world leaders in Washington, with only 2009 growth in the euro-zone revised down from the previous estimate of -0.5%.