Global growth forecasts cut further

TOKYO/LONDON, Monday

The Organisation for Economic Cooperation and Development added to a grim outlook from the World Bank on Monday, saying major economies will contract throughout 2009 and the problem of unemployment will linger.

“We see a very difficult 2009, with negative growth in the OECD area. Unemployment problems are going to continue to linger,” Angel Gurria, the head of the Organisation for Economic Cooperation and Development told Reuters television in an interview on the sidelines of a conference in Paris.

Unusual

Earlier the World Bank said that prospects for the global economy remain “unusually uncertain” as it cut 2009 growth forecasts for most economies.

Governments around the world have borrowed hundreds of billions of dollars to fight the worst economic crisis in decades, providing incentives for businesses and consumers to spend and embarking on big infrastructure programmes to create jobs and stimulate activity.

They should stick to spending programmes to reignite growth because their economies are still weak in spite of signs that the worst of the crisis may be past, World Bank Chief Economist Justin Lin said in an interview with Reuters.

Warned

On Sunday European Central Bank President Jean-Claude Trichet warned, however, that governments now had no room for more debt and would have to start bringing down budget deficits.

“There is a moment where you can’t accumulate any more debt. I think we are at that moment,” Trichet told Europe 1 radio.

The World Bank , which has recently cut its forecast for the global economy to a contraction of 2.9 per cent from 1.7 per cent in March, was releasing details on individual economies for the first time on Monday.

Concerns that investors might have been too quick to price in a quick recovery prompted stock markets to retreat last week after a powerful rally from their March lows.