OECD optimistic on world economy

High unemployment

Angel Gurria, the OECD secretary-general, said: “The great challenge … is to move from a policy-based recovery to self-sustained growth and there are a number of risks that could complicate that transition.”

Addressing a news conference in Tokyo, he cited the potential for weak consumer spending in the face of high unemployment and the return of global financial imbalances that could disrupt exchange rates.

The report from the Paris-based organisation forecast that the recovery would be uneven “with growth likely to fluctuate around a modest underlying trend for some time to come”.

It was an assessment mirrored earlier by Barack Obama, the US president, in comments during his current trip to Asia on the need to support recovery but contain debt.

Obama said it was important to recognise “that if we keep on adding to the debt, even in the midst of this recovery, that at some point people could lose confidence in the US economy in a way that could actually lead to a double-dip recession”.

Exit strategies

Gurria said “government budgets have suffered badly since the onset of the crisis and gross debt in the OECD could exceed the area’s GDP by 2011”.

In its assessment of mounting debt pressures, the report said that “stopping the rot is clearly necessary and will call for fiscal [budget] consolidation that is substantial in most cases and drastic in some”.

The OECD had harsh words for the scale of rescues for car industries, and harsher words still for governments shirking announcements of “radical” overall exit and structural reform strategies.

“It is regrettable that so few exit strategies have so far been articulated,” it said, reporting that fewer than half of OECD countries had announced clear targets for attacking budget deficits, and the policies to be launched.

But “preparing exit strategies cannot be put off,” the OECD said.