OECD forecasts a protracted economic slowdown in US, Japan and Euro area

Economic activity is expected to fall by 0.9 percent in the US next year, by 0.5 percent in the Euro area and by 0.1 percent in Japan as OECD countries enter a protracted slowdown, according to latest projections.

Presenting OECD’s gross domestic product (GDP), inflation and unemployment forecasts for these three major economies ahead of the G20 summit on the financial crisis on 15 November. Jorgen Elmeskov, Director of Policy Studies in the OECD’s Economics Department, said a high degree of uncertainty surrounds the outlook. Much depends on the depth and duration of the financial crisis, the main driver of the current recession. And he added, “The ongoing adjustment in housing markets still has a long way to go.”

GDP for the OECD countries as a whole is expected to fall 0.3 percent year-on-year in 2009 before recovering slightly to grow by 1.5 percent in 2010. The average unemployment rate in the OECD area, estimated at 5.9 percent this year, is forecast to climb to 6.9 percent next year and reach 7.2 percent in 2010. Inflation should continue to ease as economic slack puts downward pressure on prices and if, as assumed, commodity prices maintain their recent lower levels. “Against this backdrop, additional macroeconomic stimulus is needed,” said Elmeskov.

The advance projections for the US, Euro area and Japan are available on the Economic Outlook homepage.

The full Economic Outlook containing detailed forecasts and analysis for all OECD countries and other major economies will be released on 25 November 2008.