Global economic decline will continue in 2009, OECD predicts
The world's most developed economies have slid further into a recession that will continue into 2009, according to an international forecast released on Thursday.
The Organization for Economic Co-operation and Development (OECD) has issued a forecast predicting that the world's most developed economies are going to continue to contract over the next year.
"The OECD area economy appears to have entered recession," said Jorgen Elmeskov, director of the policy studies branch and economics department.
Gross domestic product is likely to decline by 0.3 per cent in 2009 for its 30 member countries, said the Paris-based organization.
It is the first time the organization has seen an aggregate shrinkage in its members' economies since it started keeping records in 1970.
The organization said the U.S. economy is likely to post 0.9 per cent negative growth in 2009, Japan will contract by 0.1 per cent and European economies by 0.5 per cent.
Uncertain projections leading into 2009 "point to a protracted downturn," with recovery not likely before the second half of next year, Elmeskov said.
The organization issued its last forecast in June. At that time, it was predicting a growth of 1.7 per cent in 2009.
Full impact not yet seen
"Even more worrying, the full impact of the financial crisis still has to unfold," said Carsten Brzeski, an analyst with ING Financial Markets. "If you think today's numbers are already bad, just wait for the next quarter."
The OECD's projections assume that the financial stress since the banking crisis exploded in mid-September will prove to be "short-lived" but be followed by an "extended period of financial headwinds" through the end of next year, with conditions then returning to near normal.
But emerging hazards such as further failures of financial institutions, emerging market economies being hit harder by the downturn in global trade and foreign investors turning even more risk shy could make the recovery take even longer, according to the forecast.
Germany enters recession
The German government also released new data on Thursday that showed the country's economy recorded negative growth for the second consecutive quarter, officially pushing it into a recession.
Germany's Federal Statistical Office reported that gross domestic product of the country, which has Europe's biggest economy, contracted by 0.5 per cent in the July-September period.
The economy had also declined for the first time since 2004 when it recorded a 0.4 per cent contraction in the second quarter.
A technical recession is defined as two consecutive quarters of negative growth.
"We are going to have to face up to a very difficult and long-lasting economic crisis," Germany's deputy economy minister, Walther Otremba, told Reuters.
Government measures should be "timely and temporary and designed to so as to ensure maximum effectiveness," while establishing a framework to ensure budget responsibility in the long term, Elmeskov said.
The International Energy Agency also cut its global oil demand forecasts on Thursday due to the recession causing slowing demand.
The IEA is forecasting the global demand for oil will average 86.2 million barrels a day for 2008 and 86.5 million per day in 2009.
It's a cut of 330,000 barrels for 2008 and 670,000 barrels from estimates it had released earlier in the year.
With files from the Associated Press and Reuters