Evidence that the global economy is weakening steadily, especially in the aftermath of the September terrorist attacks in the United States, is mounting. The latest forecaster to scale back its growth projections is the Organization for Economic Cooperation and Development.
The OECD says that 2001 growth in its 30 member countries in Europe and America will be only one half of what was anticipated only six months ago. Growth in OECD economies is now expected to total only one percent this year and one point two percent in 2002. The Paris-based OECD agrees with the International Monetary Fund that the United States is technically in recession as growth is expected to be negative in both the third and fourth quarters of this year.
But the sharpest downward revision is in Germany where 2001 growth has been scaled back to seven tenths of one percent, compared to a previously predicted two point two percent.
Business confidence is falling significantly in Germany and the release of weaker than expected confidence figures Friday sent the euro currency sharply lower. There is pressure for the European Central Bank to further reduce interest rates to spur economic activity in the 12 euro zone countries.
Earlier this week, U.S. central bank chief Alan Greenspan told a congressional committee that the fall off in business confidence is having a significant impact on countries outside the United States. Mr. Greenspan said he doubted that the terrorist attacks by themselves would have much impact on the exchange rate of the dollar.
"Exchange rates are bilateral. They really represent an evaluation of the currency of one country versus another," he said. "And if we're all being impacted equally, as we are effectively by the events of September 11th, that in and of itself should not have a material impact. And indeed currencies have been one of the very few stable financial prices that we've seen since September 11."
The euro is trading at about 90 cents to the U-S dollar, a two-week low against the dollar.
Finance ministers from some 30 countries will review economic developments at a special IMF sponsored meeting in Ottawa, Canada, on November 17.