The Organisation of Economic Cooperation and Development (OECD) has predicted an early recovery for the world economy.
In a report released yesterday, the OECD said the economic growth across the Group of Seven countries was likely to fall by 3.7 per cent this year, less than the 4.1 per cent projected in June.
The latest Growth Domestic Product (GDP) forecasts for this year provide slightly improved outlooks for Japan and Europe, and an unchanged overall projection for the US.
Despite the ‘better than expected’ results, the OECD said the government needs to continue to stimulate the economies as rising unemployment and weak housing markets continue to dampen private demand.
Moreover, the OECD warned that the current exceptionally low interest rates should remain in force for the time being.
“Regarding monetary policy, taking the first steps towards normalisation of policy interest rates from their current exceptionally low levels should in most cases and on current prospects wait until well into 2010 and in some cases even beyond,” the OECD’s acting head of economics department Jorgen Elmeskov said.
“It is also important that central banks communicate their intentions explicitly, if conditionally, so as to affect interest rates at longer maturities more effectively.
“On fiscal policy, it is important that announced stimulus measures be implemented promptly. However, the possibility of a recovery taking hold a little sooner than envisaged only a few months ago diminishes the likelihood that further fiscal stimulus will be needed in those countries having scope for such action.”