GENEVA — Two days ahead of the G-20 economic crisis summit in London, the Organisation for Economic Co-operation & Development on Tuesday issued a dire outlook for world output, forecasting it will contract 2.7 percent this year and world trade volume will decline 13.2 percent.
“The bleak scenario is driven by the strong negative response of private global demand to a combination of the credit squeeze, negative wealth effects stemming from lower house and equity prices and a generalized loss of confidence,” said Klaus Schmidt-Hebbel, OECD chief economist.
The agency forecast the U.S. economy will decline 4 percent this year, total domestic demand will fall 4.1 percent and the U.S. unemployment rate will reach 9.1 percent, up from 5.8 percent in 2008, and edge upward to 10.3 percent in 2010. The Paris-based organization predicted U.S. exports of goods and services to shrink 11.3 percent in 2009 and imports of goods and services to contract 10.1 percent.
The OECD outlook is more adverse for the euro area, with economic activity decreasing 4.1 percent from last year, and a darker scenario for Japan, with an expected 6.6 percent drop.
Major emerging countries are also expected to witness an abrupt slowdown in growth due to slack demand for exports. China is expected to expand by 6.3 percent and India by 4.3 percent — both down significantly from last year — and Brazil to witness a decline of 0.3 percent.
Also on Tuesday, the World Bank forecast the worldwide economy will contract 1.7 percent in 2009, and world trade in goods and services will fall 6.1 percent.
World Bank economists anticipate rich economies to decline 3 percent and developing economies to grow by only by 2.1 percent, a marked revision from 4.4 percent forecast in December. In regard to the richest nations, the World Bank expects the U.S. economy to decline 2.4 percent, the euro area to fall 2.7 percent and Japan to see a 5.3 percent decrease.
Concerning the world’s biggest emerging economies, China and India, the bank expects growth to ease to 6.5 percent and 4 percent, respectively.