OECD optimistic on economy; sees ‘weak recovery’ by 2010

The Organisation for Economic Cooperation and Development (OECD), in its World Economic Outlook, raised its forecast for the economy of world's most-industrialised countries for the first time in two years.

The combined economy of the 30-member nations will shrink 4.1 per cent this year, a more modest fall than the 4.3 per cent contraction estimated in March, and grow 0.7 per cent in 2010, the Paris-based group said.

In anticipating a weak recovery staggered across different economies, the OECD signalled that the Federal Reserve and Bank of Japan should not raise interest rates before 2011 and recommended the European Central Bank (ECB) cut its benchmark further.

The improved outlook conflicts with that of the World Bank, which said earlier this week that global recession will be deeper than it predicted three months ago (See: World entering slow-growth era: World Bank).

OECD in its May last week report noted that its gross domestic product (GDP) fall by 2.1 per cent in the first quarter of 2009, the largest fall since OECD records began in 1960, followed by a fall of 2.0 per cent in the previous quarter. (See: GDP in the OECD area declines 2.1 per cent in Q1 2009).

The global economic outlook appears to be improving for the first time in two years, thanks to government efforts to stimulate economies, the organisation said.