The economies of the world's biggest economies are close to grinding to a halt as increased uncertainty hampers growth, the Organisation for Economic Cooperation and Development warned today.
The UK economy, our biggest trading partner, is facing near stagnation if the OECD's central forecast of 0.3pc annualised GDP growth in the final quarter of 2011 turns out to be correct.
This would be a severe drop from 2.5pc growth in 2010's third quarter.
And the debate over fiscal policy in the United States, the eurozone debt crisis and the dwindling number of options Governments have to boost growth are driving both business and consumer confidence downward, the OECD said.
The OECD interim economic assessment is designed to check if projections made in its last economic forecast are on track
In a downgrade of previous forecasts, the Paris-based think tank also revised its earlier stance in favour of raising interest rates to advising central banks to loosen their policies more if “signs emerge of the weakness enduring or then economy risks relapsing in recession.”
The gloomy forecasts comes just ahead of a G7 meeting of finance ministers and central bankers in France who will assess the increasingly weak prospects for economies like the US and Germany.
OECD chief economist Pier Carlo Padaon said: “The impact of the sovereign debt woes in Europe and the United States and the associated turbulence in stock markets over the summer have not yet fully fed through into the indicators underpinning the projections.
The OECD’s forecast changes reflect many downgrades in forecasts from private sector economists, but are the first significant setback in the global recovery seen since the world economy started to pick itself up from the floor in 2009.
“The recovery almost came to a halt in the second quarter in many OECD economies.
“And downward revisions to earlier published data point to weaker underlying activity economic than had previously been thought,” the OECD said.