PARIS: The US faces a sharp slowdown in economic momentum next year as it grapples with a "bleak" housing market but should escape recession, The Organisation for Economic Cooperation and Development (OECD) predicted yesterday.
The OECD in its twice yearly assessment of global prospects slashed its 2008 growth forecast to 2.0 per cent from its earlier projection in May of 2.5 per cent.
It recalled that a downturn in US house sales and construction has been under way since early 2006, "and the latest data indicate that the slump is getting worse." It said: "The immediate outlook for the US housing market is bleak: housing permits, starts and surveys of builders' sentiment are all at low levels and continue falling almost without interruption." As a result, the OECD said that "GDP (gross domestic product) should decline to well below potential in 2008" before rebounding in 2009.
But OECD chief economist Jorgen Elmeskov said in a preface to the report that "accelerated adjustment in the US housing sector ... will drag down growth to low levels in the near term, but will not trigger a recession and will only modestly push up unemployment."
The downturn in the US housing sector, brought on by a wave of foreclosures in the high-risk mortgage market, has roiled global financial markets since August and led to a credit crunch.
The US economy should expand 2.2 per cent in 2009, it said. - AFP
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