The world is headed into the worst recession most people have ever experienced, but there are signs that a recovery will come next year, according to a new report from a global economic organization.
The Organization for Economic Co-operation and Development released an interim report on Tuesday that projected a decline of 4.3 per cent in economic activity this year.
And by the end of 2010, unemployment rates will hit double digits in many countries, the OECD report states.
Klaus Schmidt-Hebbel, chief economist for the Paris-based organization, said the numbers are "a bit more on the gloomy side, however with a silver lining."
"We are very strongly optimistic because we think there is a strong basis for forecasting a recovery which will be hesitant at the beginning and then will be strong toward the end of 2010," Schmidt-Hebbel said at a news conference on Tuesday.
He said the policies put in place by governments to combat the recession, and strong stimulus packages in countries around the world, should increase stability in financial and housing markets and lead to the end of the recession.
In Canada, the OECD says, "economic weakness is now broad-based," with GDP declining at 3.4 per cent at the end of 2008, and likely at a faster pace now.
Canadian employment rates are falling faster than in the 1980s and 1990s, unemployment has jumped and inflation has plummeted, largely due to lower energy prices, the report says.
"The global economic slowdown, and more particularly the very weak U.S. auto and housing sectors are cutting Canadian exports. Declining consumer confidence, falling asset valuations and accelerating job losses are undermining consumer spending."
Canada's banks and financial institutions are still stronger than most other countries, but a recovery is not expected until 2010 when other large OECD countries also pick up, the OECD says.
In the meantime the global economic situation will get worse before it gets better.
In the U.S., GDP is predicted to fall by 4 per cent in 2009, before stabilizing next year.
Japan's economic output is predicted to plummet by 6.6 per cent in 2009. Policies designed to encourage domestic spending won't be able to compensate for shrinking markets for Japanese exports, the report states. In 2010, output is expected to only decline by 0.5 per cent as the economy rebounds.
In Europe, the OECD predicts a loss of 4.1 per cent in GDP throughout 2009, and a loss of 0.3 per cent next year. The steepest decline will be experienced in the next six months.
The world's large emerging economies are being affected by tightening credit access, falling commodity prices and weakening export markets, the report states.
It predicts Brazil's GDP will fall by 0.3 per cent this year and Russia's will decline by 5.6 per cent.
