Stimulus packages are starting to show results, clearly in China and tentatively in the United States, but governments need to be prepared to do more, the head of the Organisation for Economic Co-operation and Development (OECD) said on Monday.
Angel Gurria, OECD secretary-general, told Reuters that the world economy would not bottom out until 2010 and would probably start growing again toward the end of that year.
Gurria, speaking on the sidelines of a forum in Beijing, said that China's 6.1 percent annual growth in the first quarter showed the government's fiscal stimulus and surging bank loans were making up for about half the country's export shortfall.
"It's a very powerful, very strong, stimulus, which means it is already starting to have some effect," he said. Gurria said that the combination of higher public spending and support to the banking sector were also helping to stabilise the US economy. "Altogether, this is starting to generate an impact, and they are starting to see a few positive signals," he said.
But he said that 2009 would remain a very difficult year. Last month OECD forecast that its 30 member nations would contract -4.3 percent this year. Gurria reaffirmed this outlook, saying that there would be few bright spots in the world economy apart from China and India. "With all these stimulus packages in different countries, and hopefully the resumption of credit, maybe 2010 can be a year when you stop contracting," he said. "You will start preparing for some kind of upward trend towards the end of 2010," he added.
Gurria said the jury was still out on whether stimulus measures to date were sufficient. "Right now, it's a bit of speculation. We'll have to see. But we have to be ready that if they're not, we just go ahead and make extra efforts," he said. Gurria also said that he did not see any rise in energy prices for now with demand still weak, but warned that the resulting depressed investment in energy infrastructure could cause a spike in prices when growth recovers. "You may again suffer these problems of imbalances and you may get another squeeze," he said.
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