OECD secretary general: Stimulus programs should be maintained

OECD secretary general: Stimulus programs should be maintained

10-29-2009 06:20

Angel Gurria, secretary general of the Organization for Economic Co-operation and Development (OECD), commented that countries should preserve economic stimulus to stimulate their economies, as fluctuating oil rates and a further contraction of the US housing market hinder the worldwide recovery.

Self-sufficing expansion

“It’s premature to end the economic stimulus,” the OECD secretary general stated in an interview in South Korea yesterday. “The main issue will be when to switch from a policy-based recovery to self-sufficing expansion.”

Modest recovery

Last month, the Organization for Economic Co-operation and Development forecasted that the most important industrialized economies will show a ‘modest’ recovery, as the organization predicted that the G7 countries will contract by 3.7% in 2009, from a 4.1% estimation in June.  The OECD also forecasted that the following recovery will be limited by weakness in housing markets, incomes, corporate profits and hiring.

OECD secretary general

“Economic growth is still threatened by several risks,” Gurria commented in Busan, South Korea. “Downside risks such as fluctuating oil rates could have an impact on other prices, such as food prices. Banks are still struggling with the normalization of the lending process, while governments haven’t completed the recapitalization of banks,” Gurria commented.

Increase capital base

The meltdown in the credit market resulted in a financial slump that led to global write downs and losses that represent a value of more than $1.6 trillion. ECB governor Christian Noyer, stated previously this week that banks should increase their capital base, counseling self control in dividend distribution and employee compensation.