Global Recession Close to the Bottom: OECD

By Greg Keller

PARIS -- The deepest global recession in more than 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 said Wednesday.

In its half-yearly economic outlook, the Paris-based OECD 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 with 1.1% growth in 2008. Japanese output is likely to contract by 6.8% this year and the 16 nation eurozone likely will 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% 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%, the OECD said.