World economy heads for record fall as G20 congregates

The OECD says that global GDP will slump by 4.3% this year - the worst figure since its records began.

Last Updated: 31 Aug 2010

The Organisation for Economic Co-operation and Development – the economic umbrella group for the world’s 30 largest economies – put out its stygian forecast just as world leaders began to congregate in London for the G20. The report – which also reverses previous expectations of a modest recovery in 2010 – is bound to add to the already sky-high expectations being piled onto the conference. Global economic output will now stall next year, says the OECD, rather than rising by 1.5% as previously predicted.

The timing could hardly be worse for G20 host Gordon Brown, who has got to produce some form of global agreement this week or face extremely disagreeable political consequences. The only trouble is of course, that even the world’s larger economies are coming to realise that they can only afford to throw so much money at the recession. For many of them – not least the UK – the affordability of another big fiscal stimulus is now in serious doubt.

Of course the OECD figures are not set in stone, in fact they are really only the opinions of economists – albeit a fairly learned bunch of them. And we all know that they can get things pretty wrong.  Although there is a crumb of comfort for the UK in the report – contraction here will now only hit 3.7% this year, as opposed to the previous forecast of 4.1%. That’s now lower than the Eurozone average, which may save Gordo some face at the G20 after all.

But the fact remains that it’s time for the British PM to heave a substantial rabbit out of the G20 hat – a plan to save the world on a shoestring budget no less. Or at any rate to be able to plausibly claim to have done so. Good luck Gordon…

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