Think tank says 'no double dip'

| Friday September 24, 2010 00:00

It now expects the world economy to grow by 3.5 percent this year, compared with a previous forecast of 3.7 percent.

Separately, the Organisation for Economic Co-operation and Development (OECD) also cut its US growth forecast.The OECD predicts the US economy will grow by 2.6 percent this year, having previously predicted expansion of 3.2 percent.

It also warned in its latest economic survey of the US that the downturn may trigger long-term damage to the economy, with higher long-term unemployment.

The CEBR said that it expects the US economy to expand by 2.2 percent next year, after growing by 2.5 percent this year.

In its quarterly Global Prospects report, the CEBR also lowered its global forecasts for the next four years.The sharpest downgrade is for next year. It cut its growth forecast for 2011 to 3.4 percent from the 4.1 percent it had predicted just three months ago.

Although US manufacturers have increased their output over the past year, the CEBR does not expect the level of growth caused by the end of destocking to last.

It believes corporate spending in the US will eventually boost growth, but this may not happen until 2012.'I would be prepared to bet one of my better shirts on there being no global double dip,' said CEBR chief executive Douglas McWilliams.

'Although their growth will be affected by slower growth in the West, the emerging economies are too resilient for global growth to go negative again in the short term.'

But the CEBR also warned that the failure of the wheat harvest in eastern Europe, caused by drought and wildfires, meant that consumers worldwide would face higher food prices and therefore have less money available for spending on other goods and services.(BBC)