The global economy will suffer from US attacks until at least the second half of 2002, with consumer and business confidence falling in most countries, the OECD's chief economist has warned.
Ignazio Visco told the latest issue of the Organisation of Economic Cooperation and Development magazine, OECD Observer, that activity in the third quarter of this year would be directly affected, and that second-half US growth would be negative. He said that this is the sign of a recession.
'Then, a wait and see attitude will prevail among consumers and investors, perhaps through the first half of next year,' Visco forecast. 'Once the aftermath of the attacks has vanished, activity in the OECD should turn around,' he continued, while warning that an exact timetable for economic recovery was hard to predict.
Visco told the OECD Observer that recovery depended to a large extent on moves by financial authorities to restore confidence and support demand, saying that 'these actions have so far been impressively appropriate'.
But while major injections of liquidity had helped reduce the risk of insolvency, 'they could rekindle inflationary pressures and require a sharp policy tightening in 2003,' he said.
Visco also warned that longer-term risks included curbs on trade and capital flows, saying that 'this might impact negatively not only on advanced countries, but also on emerging economies, which have a lot to lose.'
