Global recession expected into '09

LONDON — The world's developed countries, hard hit by the financial crisis, have probably tipped into a recession that will last at least through the first half of 2009, according to new projections issued Thursday.

The Paris-based Organization for Economic Cooperation and Development forecast that economic output would shrink 1.4 percent this quarter for the 30 market democracies that make up its membership — and keep contracting until the middle of next year.

That would mean the developed world has now entered a slump estimated to last at least three quarters; two consecutive quarters is a common definition of recession. For all of 2009, these countries' economies would contract by 0.3 percent.

Additionally, the U.S. economy would fall by 2.8 percent in the last quarter, after a 0.3 percent drop in the third quarter and then shrink by a full 0.9 percent in 2009. Japan's economy would shrink by 0.1 percent next year and the euro area by 0.5 percent.

That would be the first time since 1974-5 — when they were suffering from the Arab oil embargo and a severe bear market for stocks — that the United States, Europe and Japan have fallen into recession about the same time.

And it was the first time the organization has seen an aggregate shrinkage in its members' economies since it started keeping records in 1970.

The latest forecasts represent a sharp downgrade since the last set in June, when the group forecast OECD growth of 1.7 percent in 2009 and indicated that the worst of the financial crisis might have passed. Since then, though, the outlook for the world economy has deteriorated sharply in the wake of the banking crisis, which is rapidly spreading to the wider economy.