OECD warns that global trade is in freefall
World leaders gathering for Thursday's G20 summit in London were warned today by the Organisation of Cooperation and Development that the world economy was shrinking much faster than previously thought and that global trade was in freefall.
The Paris-based thinktank also told the British prime minister, Gordon Brown, there was no room for the type of fiscal stimulus that the prime minister had been touting around the world.
"The world economy is in the midst of its deepest and most synchronised recession in our lifetime caused by a global financial crisis and deepened by a collapse in world trade," the OECD said in its latest twice-yearly economic forecasts.
It predicted that in spite of big cuts in interest rates around the world, fiscal stimuli and banking system bailouts, recovery would not come until 2010 at the earliest.
The organisation had warned on Monday that unemployment among its 30 rich nation members was likely to rise by 25m in the current crisis.
Japan and Germany announced big rises in joblessness today: in Germany it rose to 3.5m, its highest since February 2008 and giving a jobless rate of 8.1%, while Japan's rate reached a three-year high of 4.4%. Japan announced a new fiscal stimulus package as it seeks to pull its economy - a big exporter punished by the slump in world trade - out of a deep recession.
Brown said G20 leaders should aim to save or create 20m jobs and must act together to increase the potential impact of their actions.
"Leaders meeting in London must supply the oxygen of confidence to today's global economy and give people in all of our countries renewed hope for the future," he said .
The OECD expects global trade volumes to slump by 13% this year. "International trade is in freefall," it said.
It expects its member economies to shrink by an average 4.3% this year, with the United States contracting by 4%, the eurozone by 4.1% and Japan by 6.6%. It forecasts Britain's economy will shrink by 3.7% - the worst performance since the second world war.
Separately, the World Bank forecast that growth in the developing world would slow to just 2.1% this year from 5.8% in 2008.
"Across the developing world, we see that conditions of recession are affecting the poorest people, making them even more vulnerable than before to sudden shocks but also reducing opportunities available to them, and frustrating their hopes," said Justin Yifu Lin, the World Bank's chief economist.
