Good news and bad news from the Organisation for Economic Co-operation and Development, which has just released its latest quarterly musings. The think-tank has revised its forecasts upwards for the global economy: it’s now forecasting an imminent end to the recession, and a return to growth in 2010. But there is one notable exception: it reckons Britain’s recession will actually be worse than feared, and expects our economy to stagnate at best in 2010. So we’re going to be the dunce of the global class next year…
The bad news, according to the OECD, is that the world economy will shrink by 4.1% this year – the biggest slump since the aftermath of the Second World War. On the other hand, it says, a better-than-expected recovery by the US and big developing countries like Brazil and China will help it bounce back by 0.7% in 2010. Rather weedy growth, admittedly – but given that it had previously predicted a 0.1% contraction, it’s a big step in the right direction. The BRIC countries are likely to be the major driver of this growth (China is expected to grow 9.3% in 2010, for instance), although even previous laggards like the US and Spain are likely to perform above the average.
Unfortunately, it’s a very different story for the UK, where the OECD has actually downgraded its forecast. It’s now predicting a 4.3% contraction this year, the worst since 1945 (below its previous estimate of 3.7%, not to mention the Government’s estimate of 3.5%), with output remaining basically flat in 2010. Britain is in a ‘severe recession’, it said, with the credit supply ‘severely impaired’ by the financial crisis. In other words, we’re in a severely bad way, and although the fall in the pound has mitigated our problems, we shouldn’t expect a recovery any time soon.
More alarmingly, it also thinks we’ll fall further in the red than any other major country. It expects the budget deficit to top 14% of GDP, compared to an average of 8.5% for the 30 biggest economies. Not for the first time, it’s calling on the Government to ‘develop a concrete and comprehensive plan’ to get the public finances back in order. Not what Gordon Brown will want to hear – particularly as the OECD also thinks that unemployment will be inching towards 10% by the time the General Election comes around.
So it looks like the recession will be a little better than feared for most of the world – but a little worse than feared for us. Perhaps it's time to move to Brazil or China?
In today's bulletin:
OECD: No recovery for Britain until 2011
Comet finds that we don't love electricals
Regulators bicker and bankers get back to business as usual
Carry your own bags, says Ryanair
The sweet sound of business success