US Slowdown Impact Will Last Longer Than Foreseen: OECD

Source : The Business Times, April 25, 2008

(PRAGUE) US economic weakness and its impact on the global economy are likely to last up to nine months longer than previously expected, OECD secretary-general Angel Gurria was quoted as saying yesterday.

Mr Gurria said the OECD had initially thought the crisis would weigh on global economic growth in the first half of this year and there would be a slight recovery starting in early 2009.

'We expect a drop in the US economy this year and very weak growth in Europe. The crisis will be six to nine months longer than we had previously expected,' Mr Gurria was quoted as saying by Czech daily Hospodarske Noviny.

Mr Gurria is due to present the OECD's economic outlook for the Czech Republic later yesterday. His comments were translated into Czech by the paper.

He said no developed country will completely escape the global turmoil triggered by problems in the US sub-prime mortgage market.

'The crisis will have an impact on all developed countries,' he told the paper. 'But the problem is not the mortgage crisis itself and the real problems of the US economy. We are devastated by a huge crisis of trust.'

A Reuters poll earlier this week showed analysts' views that the US economy nearly stalled in the first quarter and will shrink between now and June, but any recession should be less severe than the last major downturn in the early 1990s.

For the year, economists saw the US economy expanding by one per cent, below forecasts in March of 1.4 per cent, although they predicted a rebound to 2.1 per cent in 2009.

Another Reuters poll showed forecast growth at 1.5 per cent in the eurozone this year, down from a January forecast of 1.8 per cent.

Mr Gurria said he would not recommend widespread action by European governments to keep economies running by easing tax burdens, as this move could deepen fiscal deficit problems. -- Reuters