The Organization for Economic Cooperation and Development says the world economy is near the bottom of the worst recession in post-war history.  The body that represents the 30 most industrialized nations said that those economies would shrink 4.1% this year.  But it adds that recovery is likely to be "weak and fragile" for some time.

The UK is in a "sharp recession", it says, with output set to decine by 4.3% in 2009, worse than it’s previous forecast of 3.7% fall.  The OECD predicts zero growth in the UK economy in 2010, and says that the UK budget deficit will reach 14% next year - both worse than UK government estimates. It looks like the worst scenario has been avoided.

The OECD says that the pace of the global downturn is now moderating after the sharp drop in the six months to March, but it still expects world output to shrink by 2.2% this year.  However, this is the first time for two years it has revised upwards it’s overall economic forecasts, especially for 2010, with the economies of Japan and the US now expected to decline less sharply than projected in it’s previous report.  It says that the advanced economies will return to weak growth of 0.7% in 2010, compared with it’s previous forecast of a contraction of 0.1%.

Even if the subsequent recovery may be slow, such an outcome is a major achievement of economic policy.  The OECD adds that there are already signs of recovery in the large non-OECD countris such as China, and that in the US activity could bottom out in the second half of 2009.  However, it is more pessimistic about the prospects for the UK and the eurozone.  Tough measures will be needed to eventually reduce government budget deficits that have been stretched by the crisis.  It urges governments to begin planning for such adjustments now even if they cannot be fully implemented until the economy improves. 

See more of this discussion from the Organization for Economic Coorperation and Development from Steve Schiffers, BBC News here...