OECD revises forecasts upwards

The Organisation for Economic Co-operation and Development (OECD) says the world economy will recover sooner than previously expected. The group's interim economic outlook says the economic the G7 group of the world's richest economies will return to growth in the third quarter of this year with a +1.2% rise in GDP

The most robust recovery is seen in Germany, where GDP is expected to rise +4.2% this quarter compared to the second quarter of the year. It will be followed by France (+1.6%) and Japan (+1.1%). However, the remaining countries in the group are expected to stay in recession, with Canada falling the most at -2.0%, followed by the US -1.6%, Italy (-1.1%) and the UK -1%.

By the fourth quarter of the year, the OECD expects the picture to be brighter, with Canada and Italy returning to growth and the UK flat. However, it expects Japan to slip backwards with a -0.9% fall in GDP. Overall G7 growth is still expected to rise however, with a +1.4% rise in Q4, compared to +1.2% for this quarter.

As a result of these upward revisions, the OECD has revised its projection for 2009 as a whole. Instead of the previously forecast -4.1% fall in the G7's GDP the OECD now puts the figure for this year at -3.7%.

The OECD's interim assessment highlights a range of factors that have lead to this improved outlook, including reduced corporate bond spreads, the easing of bank credit, rebounding share prices, corrections to inventories, stabilising world trade volumes, improvements in export orders and the bottoming-out of the US housing market.

It also highlights the fact that the recovery is underway in most of the world's major developing countries - Brazil, Russia, India and China (BRIC countries).