OTTAWA - The industrial world -- including Canada -- is headed for a growthless recovery next year, says the Organization for Economic Co-operation and Development.
In a new outlook that is a slight improvement over its March projection, the Paris-based organization that represents 30 developed countries is in line with most forecasters in predicting the global recession will end late this year.
But it presents a more gloomy prospectus for next year, estimated growth in Canada at 0.7 per cent -- so low that even the U.S. tops it with a modest 0.9 per cent advance.
That is well below the broad consensus of economists who see Canada growing at slightly above two per cent next year. The Bank of Canada has said growth will reach 2.5 per cent.
"The pace of contraction appears to be slowing, but recessionary conditions are expected to linger through the third quarter, with only a slow recovery thereafter," the CD' says in a one-page summary on Canada.
"Unemployment is projected to keep rising until early 2010 and inflation pressures to stay muted."
On Monday, global markets plunged on release of a World Bank forecast that, while darker in tone, was nevertheless more sunny in its actual country-to-country projection.
For instance, the World Bank saw the U.S. growing by 1.8 per cent next year, while the CD's figure is half that amount. The World Bank did not have a Canada breakdown.
"This is an improvement over CD's previous forecast, but it is still more pessimistic than everyone else," said TD Bank economist Richard Kelly.
Despite the lower CD growth numbers, markets were upbeat Wednesday, with the Toronto Stock Exchange posting gains over 200 points by mid-day.
BMO Capital Markets economist Douglas Porter says markets may not be paying as much attention to international forecasts as they are to real data, and Wednesday brought more evidence that the economic tumble of the past year is nearing bottom.
Durable goods orders in the U.S. rose a surprisingly high 1.8 per cent in May, the second straight monthly advance and double expectations.
On the other hand, new U.S. housing sales slightly disappointed expectations.
"All these forecasts are confusing things, but I think the central theme that is emerging is that the recovery will be modest," noted Porter.
On that note, the CD and World Bank are on the same page, as is most forecasters.
Both agree that the deepest global recession in over 60 years is mostly history.
And both agree that the recession was painful, with the CD saying contraction in its member countries reaching 4.1 per cent this year, slightly better than the 4.3 per cent predicted in March.
But it says the contraction could have been worse and will stop soon.
"Thanks to firm action to stimulate our economies, it appears that we have escaped the worst during this crisis," said CD Secretary-General Angel Gurria.
And although the international organization urges countries to move quickly on implementing stimulus programs, it also warns governments should be prepared to exit from trying to pump up the economy once recovery does appear.
"The next few months will be equally testing," said Gurria. "There needs to be a clear and credible plan and timeline for phasing out the emergency measures as the recovery takes hold." "It is critical to consider these exist strategies now in order to prevent new risks in the years ahead."
