OECD: U.S. Will Lead Economic Recovery By Late 2003

By Agence France-Presse Industrialized nations are stumbling toward a U.S.-led recovery in late 2003 that remains threatened by geopolitical uncertainties, but a slip back into recession is unlikely, the Organization for Economic Cooperation and Development (OECD) said Nov. 21. "Forward-looking indicators suggest that a solid recovery may be slow to materialize," the OECD said in its semiannual Economic Outlook report. "A broad-based economic recovery is unlikely to emerge until current uncertainties dissipate, possibly well into 2003." But the organization determined that monetary and fiscal stimuli had boosted public spending, consumption and housing investment in North America and some European economies, and "the effects of the stimulus will continue to feed through for some time." Also helping support growth was the apparent bottoming out of the information technology downturn, it said. "A fall back into recession is therefore improbable, even though greater geopolitical uncertainty and a further slide in world equity markets have been weighing on confidence in the second half of the year," the OECD said. OECD chief economist Jean-Philippe Cotis told a news conference that economic recovery was expected "some time in the first quarter" of next year. The OECD is expecting "four, five, six months of sluggish growth, no recession and then gradual recovery," Cotis said. In its report, the OECD cut forecasts for both U.S. and euro-zone growth this year and next. It trimmed its forecasts for U.S. growth to 2.3% from 2.4% and its 2003 forecast to 2.6% from 2.7%. It forecast growth of 3.6% in 2004. The OECD also cut its forecast for euro-zone 2002 growth to 0.8% from 1.3% and its projection for 2003 growth to 1.8% from 2.9%. It also said it expected output to rise to 2.7% in 2004. The OECD reiterated forecasts for Japan made earlier this week. It expects Japanese GDP to decline 0.7% this year, and then grow 0.8% in 2003 and 0.9% in 2004. The OECD acknowledged that downside risks to its recovery forecast appears to dominate: the possibility of new financial market shocks and a further deferral of corporate investment, a further cut in household wealth arising from falls in property prices, a disorderly unwinding of international imbalances, emerging market crises and a possible surge in oil prices. The global recovery is heavily dependent on the United States, where potential growth still far exceeds what can be observed and expected in other countries, it said. Copyright Agence France-Presse, 2002