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Many leading industrialized nations face their worst economic downturn for 25 years, the Organisation for Economic Coordination and Development (OECD) warned, forecasting that the U.S., European, and Japanese economies would shrink next year.
OECD said that unemployment will rise by 8 million, house prices will continue to fall in many countries, and there is a risk the financial crisis has further to run, with fragile banks exposed to new bad debts.
"Many OECD economies are in or are on the verge of a protracted recession of a magnitude not experienced since the early 1980s," said OECD Chief Economist Klaus Schmidt-Hebbel.
"The number of unemployed in the OECD area could rise by 8 million over the next two years," Schmidt-Hebbel added, saying that the OECD area of 16 countries jobless rate was set to rise from 5.5% in early 2008 to 7.25% in 2010.
The economies of all major industrialized countries were forecast to contract in 2009, with the U.S. economy shrinking by 0.9%, the eurozone by 0.6%, Japan by 0.1%, and the overall OECD zone by 0.4%.
The most acute downturns would occur in Britain, Hungary, Iceland, Ireland, Luxembourg, Spain, and Turkey, the OECD said, while emerging markets China, Brazil, Russia, and India would experience slower growth.
"The recovery is also more typically more muted following a banking crisis," said the report, adding that many OECD countries would not return to their long-term average growth rates until mid 2010.
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