By: Mike Campbell
The Organisation for Economic Co-operation and Development has 30 member states drawn from developed nations and has the mandate to support economic growth, boost employment and contribute to world trade, amongst other things. The OECD has just more than doubled its 2010 growth forecast from 0.7 to 1.9%, for the group as a whole. Whilst this is undoubtedly good news, OECD cautions that members may be in for a choppy ride. The growth prediction has been influenced by the stimulus measures which have been put in place in just about all developed countries and these measures will need to be wound down at some stage. Nations will need to put their houses in order; for instance the UK needs to take steps to restore confidence about the stability of public finances and there is remaining doubt over the effectiveness of the purchasing of assets under the “quantitative easing” programme whereby the UK printed extra money to inject into the economy. Even so, OECD predicts that the UK will see growth above the 1% level in 2010 compared to contraction of nearly 5% for 2009. The star performer will be South Korea which is predicted to grow by 4.5% next year following on from stagnation in 2009.
The OECD was gloomy with respect to employment prospects. They predict that more jobs will be lost than created in the US until the first part of 2010 (more optimistic than some other analysts) and that Europe will continue to shed jobs until 2011.
OECD forecasts for non-members predict that Russia will reverse a 9% contraction for 2009 with growth of 5% next year. China and India are expected to grow by 10 and 7%, respectively.
Figures released for Japan reveal that it has returned to price deflation for the first time since 2006 despite Q3 growth of 4.8%. Deflationary pressure may adversely affect the economy as people put of buying decisions in the hope of cheaper prices later; particularly against a backdrop of high unemployment and continuing fears over job security.
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