Asia helps feeble West in global recovery - OECD

By Brian Love

PARIS (Reuters) - Asia is leading the global economy out of the deepest downturn in decades but the recovery will be marred by high unemployment and huge government debt across the industrialised countries, the OECD said on Thursday.

Central banks and governments in major Western economies should prepare for a gradual upwards shift in ultra-low interest rates and for fiscal consolidation once recovery is stronger, but they will only need to move in late 2010 at the earliest given that inflation is so low, it said in its Economic Outlook.

The Paris-based Organisation for Economic Co-operation and Development raised its global growth forecast for next year to 3.4 percent from the 2.3 percent it was predicting as recently as June, after an estimated contraction of 1.7 percent in 2009.

"We are looking at a scenario where disaster has been avoided but we're still looking at a scenario which involves slow growth and high unemployment," the OECD's chief economist, Jorgen Elmeskov, told Reuters television in an interview.

In the twice-yearly report, the OECD lowered its estimates of the scale of this year's recession and substantially raised most of its forecasts for growth in 2010, when it said the economy would remain dependent on government life-support.

U.S. growth, measured by gross domestic product, should rise 2.5 percent in 2010 after a contraction of 2.5 percent in 2009, and rise a further 2.8 percent in 2011, the OECD said.

Euro zone GDP should rise 0.9 percent in 2010 and 1.7 percent in 2011 after a downturn of 4.0 percent in 2009, it said.

Japan could expect GDP growth of 1.8 percent in 2010 and 2.0 percent in 2011 after a drop of 5.3 percent in 2009, it said.