OECD says China, India can’t stop first global contraction in 60 years

Published by rudy Date posted on March 21, 2009

BEIJING: The world economy is likely to shrink in 2009 despite growth in Asian powerhouses China and India, the head of the Organization for Economic Cooperation and Development (OECD) Angel Gurria said Friday, warning of a first global contraction in 60 years.

“Now we are probably seeing a world which will go negative because even the positive growth of India and China is not going to be enough to offset the negative growth in [developed countries],” he told reporters in Beijing.

Gurria was replying to a question about his expectations for growth in 2009.

His remark came after the International Monetary Fund said it also believed the global economy could contract in 2009.

“The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,” IMF Managing Director Dominique Strauss-Kahn said in Tanzania earlier this month.

Gurria, secretary general of the OECD, also said in Friday’s briefing that growth in China’s economy this year was likely to be between 6 percent and 7 percent.

The World Bank earlier this week published a new forecast for the Chinese economy, reducing its growth prediction for 2009 to 6.5 percent from 7.5 percent.

China’s economy grew 9 percent in 2008, according to the government, down from 13 percent in 2007.

Gurria said there would be “very negative” growth in member countries of the OECD, adding that firm estimates would be released soon.

The OECD groups 30 industrialized, democratic nations across the world and serves as a policy adviser and a forum for debate on economic and political issues.

The secretary-general expressed hope that a $586-billion Chinese economic stimulus package announced late last year could spur demand in China and ease the worldwide contraction.

“I would like this [package] to be as successful as possible because we need a few locomotives. Our traditional locomotives are all in the repair shop. We need the aggregate demand of China and countries like India,” he said.

Gurria spoke at a briefing held to release an OECD report on China’s rural development.

The global economic crisis has thrown millions of China’s migrant laborers out of work, raising official fears of social instability.

China this month vowed a massive boost to social spending, including a 17.6-percent increase in social security spending, and a 38.2-percent rise in healthcare spending.

The OECD report said the crisis will strain China’s ability to shield migrants and the rural regions that depend on their remittances from the impact of the crisis.

“The economic crisis threatens every aspect of every country in the world and therefore China and therefore the rural population of China,” Gurria said.

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