This is a cautious but welcome outlook for the world economy. However, it still remains gloomy for the UK. The Telegraph headlines it as:-
UK economy to be last to exit global recession, OECD says
Britain will be the last major economy to exit the recession, the OECD has warned as it downgraded its forecasts for the country. The UK is the only one of the world's major economies to see a deterioration in its outlook during the past three months”
Christina
FINANCIAL TIMES 3.9.09
OECD upgrades global economic outlook
By Norma Cohen
A recovery in the world’s economy now looks likely to come earlier than had been expected just a few months ago, although the return to normal conditions is likely to be slow and protracted, according to the Organisation for Economic Co-operation and Development.
In its interim assessment of the economic outlook for this year, the OECD warned that there are considerable headwinds that will weigh on recovery. “It is important not to get carried away,” said Jorgen Elsmskov, acting head of the OECD’s economics department, presenting the outlook in Paris today.
For most G7 nation economies, the OECD is now forecasting a smaller contraction than it had made in June, with aggregate gross domestic product expected to decline by 3.7 per cent this year against a forecast of 4.1 per cent made just three months ago.
Within that, however, the UK remains an exception with a full-year GDP contraction of 4.7 per cent now expected for the current year – a forecast that takes account of the sharper-than-expected decline in second-quarter output – against an initial forecast of a 4.3 per cent decline. Indeed, the contrast with earlier expectations in the case of the UK is even more marked because the OECD subsequently raised its forecast to a 4.1 per cent decline in output.
Within the G7, the OECD is forecasting growth of an annualised rate, quarter on quarter, of 1.2 per cent and 1.4 per cent respectively. But within that, there are a fairly wide range of forecasted outcomes. Germany is expected to see GDP expand at an annualised rate of 4.3 per cent in the third quarter of this year, easing to an annualised rate of 1.8 per cent in the last three months of 2009.
“Incoming information for the third quarter is better than expected and estimates for the third and fourth quarter are mostly positive,” said Mr Elsmkov. But further ahead in 2010, “there is no reason for us to change our assessment which is for a slow recovery”, he added.
“Banks, households and businesses still have a long way to go to repair their balance sheets and that will create headwinds [on demand],” he said.
But the UK economy is expected to contract in the third quarter at an annualised rate, quarter on quarter, of 1 per cent in the third quarter and hold flat in the fourth quarter.
Japan is expected to show GDP growth at an annualised rate of 1.1 per cent in the third quarter from the second although this is expected to be followed by a contraction at an annualised rate of 0.9 per cent in the fourth quarter. Mr Elsmkov said the negative turn at year end is partly because of business surveys showing a sharp fall in confidence among smaller businesses which is expected to weigh on output.
But a variety of better-than-expected developments overall led to an improved outlook. In particular, conditions in financial markets appeared much better than they had a few months ago. Spreads between yields on corporate bonds and risk-free government bonds have narrowed considerably, and fewer banks are tightening lending standards. However, spreads on credit default swaps for medium-term debt of financial institutions remain relatively high, suggesting concerns remain about the sector, Mr Elsmkov said.
“These improvements owe a lot to government interventions,” he added. Overall, the effect of these improvements are likely to aid GDP growth. Other factors expected to boost demand, at least in the short term, are stock building after the rapid pace at which business inventories were disposed of in the first half of this year and a better-than-expected bounce in world trade as firmer export orders emerg
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