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OECD: Delayed Spending Cuts and More Stimulus Money May Be Needed


The Organization for Economic Cooperation and Development (OECD) cautioned world economic leaders that they may have to forestall plans to reduce spending, and said central banks may have to provide more stimulus money if economies slow for an extended period of time.

Numbers released by the Paris-based think tank show that the global economic recovery may be stalling slightly, as planned growth in the second half of this year is less than expected.

"Annualized growth in [the Group of Seven's leading industrial nations] gross domestic product will slow to 1.4% in the third quarter and 1% in the final three months of the year," the Wall Street Journal reports. "That follows expansions of 3.2% and 2.5% in the first and second quarters of 2010, respectively."

"It is not yet clear whether the loss of momentum in the recovery is temporary ... or whether it signals greater underlying weaknesses in private spending at a time when policy support is being removed," the organization said.

Should the slow down persist, "additional monetary stimulus might be warranted," and "where public finances permit, planned fiscal consolidation could be delayed."

Still, according to the Associated Press's account of the report, another global recession is not imminent. "It is unlikely that we are heading into another downturn," it quoted chief OECD economist Pier Carlo Padoan as saying.

But as the AP reports, the recommendation that spending cuts be delayed "represents a shift from [the OECD's] view just a few months ago when it urged governments around the world to get a grip on ballooning budget deficits."

The news comes after President Obama proposed an additional $50 billion in infrastructure spending this week.

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