OECD fears 4.3 per cent contraction in 2009

The Organisation for Economic Cooperation and Development yesterday urged "quick and decisive action" to restore global growth while warning that the OECD economies may shrink 4.3 per cent this year.

OECD chief Angel Gurria made the new negative growth prediction for industrialised nations at a Group of Eight "social summit" on the human cost of the world financial crisis, Italy's ANSA and Radiocor news agencies reported.

Warning of a "fully-blown social crisis with scarring effects on vulnerable workers and low-income households," Mr Gurria urged "quick and decisive action" in his speech to the G8 labour ministers plus those of six emerging nations.

He added: "Restoring global growth is an economic and political priority, but also an ethical, moral, social and human imperative."

The three-day Rome meeting comes amid dire warnings of social unrest and follows protests in several European cities ahead of a summit of the Group of 20 developed and developing nations on the financial crisis, set for Thursday in London.

Mr Gurria criticised stimulus packages introduced so far for earmarking too little for social protections.

"The bad news is that these additional funds are rather limited, accounting for about eight to 10 per cent of total expenditures in the United States and France and less in most of the other countries," he said.

"This may turn into a missed opportunity."

Many developing countries do not have the kind of safety nets that help to soften the blow of rising unemployment in industrialised countries, Mr Gurria said.

"Only about one quarter of vulnerable developing countries have the ability to finance job creation or safety-net programmes," he told the ministers, urging "enhanced and more inclusive international cooperation".

Mr Gurria described the outlook for the short-term labour market outlook as "gloomy," citing an OECD forecast of unemployment rates nearing "double digits" in the OECD area except Japan by 2010, compared with the recent low of 5.6 per cent in 2007.

The bloc could see an additional 25 million unemployed, "by far the largest and most rapid increase in OECD unemployment in the post-war period," the OECD said in a statement.

The organisation said it was recommending measures to promote labour demand, boosting safety nets for the newly unemployed and low-income families, and "decisive actions targeted on at-risk young people".