US, Europe to go through long recession, OECD says
The OECD countries as a whole went into recession in the third quarter of this year and will experience four consecutive quarters of negative gross domestic product growth, a report says.
Paris -- The United States and the nations of the eurozone have entered an economic recession that will last at least until the third quarter of next year, the Organization of Economic Cooperation and Development (OECD) said in its semi-annual Economic Outlook, released Tuesday in Paris.
"Twenty-one of 30 OECD member countries will go through a protracted recession, of a magnitude not seen since the early 1980s," OECD chief economist Klaus Schmidt-Hebbel told journalists during the launch of the report.
According to the organization's outlook, the OECD countries as a whole went into recession in the third quarter of this year and will experience four consecutive quarters of negative gross domestic product (GDP) growth -- that is, until the third quarter of 2009.
As a result, the US, eurozone and Japanese economies are expected to shrink overall in 2009, with the US economy seen to contract by 0.9 percent next year, while the eurozone GDP will shrink by 0.6 percent and that of Japan by 0.1 percent, the OECD said.
GDP for all 30 OECD nations is seen to decline by about 0.4 percent on the average next year.
"The recession will be deeper and longer than previous recessions in four OECD countries - France, Italy, Germany and the United States," Schmidt-Hebbel said, and warned: "Recovery will be slow."
In the United States, the economic slump was caused by three factors, the OECD chief economist said - the housing downturn, the severe financial crisis and what he called "massive losses" in household wealth because of the stock market collapse.
"This affects consumption certainly," Schmidt-Hebbel said.
As a result of the economic slump, there will be "8 million more unemployed people by 2010" in OECD countries, Schmidt-Hebbel said.
For the United States, unemployment is foreseen to grow from 5.7 percent this year to a high of 7.6 percent in the first quarter of 2010. Eurozone joblessness will rise from 7.4 percent to as high as 9.1 percent in 2010. In Japan, unemployment will top out at 4.4 percent, the OECD said.
Prices are expected to fall across the board, with Japan forecast to experience deflation for at least six consecutive quarters starting in mid-2009.
According to the OECD, the economic crisis will have a far more limited effect on large developing nations, such as China, India and Brazil.
The Chinese economy is expected to decline from its high of 2007, when GDP grew by nearly 12 percent, to expand by "only" 8 percent in 2009.
India's GDP growth will drop from 9 percent in 2007 to 7 percent this year, before recovering slightly next year, while the Brazilian economy is seen to grown by 3 percent in 2009, after growing by 5.3 percent this year.
According to Schmidt-Hebbel, the forecasts are accompanied by risks to their accuracy. "This time the risks are higher and more toward the negative than in previous cases," he cautioned.