Global economy recovering on Asian growth: OECD

Asian economies are leading the global economy out of the deepest trough it has hit in decades, but recovery is expected to be anything but smooth with high unemployment and massive government debt in industrialised nations according to an OECD statement issued Thursday.

Central banks and governments in major Western economies should prepare for a gradual upwards shift in ultra-low interest rates and for fiscal consolidation once recovery becomes stronger. But this would need to be done in 2010 at the earliest given the low inflation rate, the OECD said in its Economic Outlook. 

The Paris-based body has raised its global growth forecast for next year to 3.4 per cent from the 2.3 per cent it predicted in June after an estimated contraction of 1.7 per cent in 2009.

OECD chief economist, Jorgen Elmeskov told Reuters that it was looking at a scenario where disaster has been avoided but one which involves slow growth and high unemployment. 

In the twice-yearly report, the OECD downscaled its recession projection and raised most of its forecasts for growth in 2010, when it said the economy would remain dependent on government life-support. 

US growth, measured by GDP should rise 2.5 per cent in 2010 after the 2.5 per cent contraction of 2009 and a further 2.9 per cent rise in 2011, the OECD said.