Global recession nearing bottom, OECD says

PARIS -- The deepest global recession in over 60 years is close to bottoming out, but recovery will be weak unless governments do more to remove uncertainty over banks' balance sheets, the Organization for Economic Cooperation and Development (OECD) said Wednesday.

In its half-yearly economic outlook, the Paris-based organization said it expects its member countries' economies to shrink by 4.1% this year, with only government rescue measures heading off an even worse decline.

That is a slight improvement from the OECD's last forecast in March of a 4.3% decline this year and is the group's first upward revision to its forecasts in two years, Secretary General Angel Gurria said at a news conference in Paris.

"A really disastrous outcome has become more of a remote risk," said OECD acting economics department head Jorgen Elmeskov.

Yet the recovery "is likely to be both weak and fragile for some time," Gurria said.

The OECD's slightly less pessimistic outlook contrasted with the World Bank's decision Monday to slash its own economic forecast. The Washington-based multilateral lender said global output will contract 2.9% this year, worse than its view in March of only a 1.7% drop. The bank cited much deeper and broader economic damage in developing countries.

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The OECD forecast applies only to developed countries, where key growth areas like manufacturing and household spending have been hit particularly hard by the economic crisis.

Both organizations agree, however, that the recovery "will be weak, and that's the main story," said Julian Jessop, chief international economist at Capital Economics in London.

The OECD now expects the U.S. economy to shrink by 2.8% this year after 1.1% growth in 2008. Japanese output is likely to contract by 6.8% this year and the 16 nation euro-zone will likely shrink by 4.8%.

The OECD forecast a return to growth in all three regions next year, with overall growth across its membership expected to average 0.7% in 2010, according to the report.