LONDON – The global economic recovery could be slower than expected but another recession remains unlikely, especially if governments don’t overdo their spending cuts, a leading international economic body said Thursday.

In its latest assessment, the Paris-based Organization for Economic Cooperation and Development urged policymakers around the world to be careful not to choke off the economic recovery by cutting back on spending too much and too soon.

“If the slowdown reflects longer-lasting forces bearing down on activity, additional monetary stimulus might be warranted,” said the OECD’s chief economist, Pier Carlo Padoan. “Where public finances permit, planned fiscal consolidation could be delayed.”

The OECD’s recommendation on austerity measures represents a shift from its view just a few months ago when it urged governments around the world to get a grip on ballooning budget deficits.

Overall, the OECD now expects the Group of Seven rich industrialized countries to grow by around 1.5 percent on an annualized basis in the second half of 2010. The G-7 are the U.S., Britain, Canada, France, Germany, Italy and Japan.

Though that’s down from its previous growth prediction of 1.75 percent, issued in May, the OECD still reckons that the loss of momentum in the recovery is likely to prove “temporary.”

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“It is unlikely that we are heading into another downturn,” Padoan said.

The OECD said robust corporate profits and already low business investment indicate that capital spending is unlikely to weaken further, thereby helping to support economic activity at a time when consumer spending is set to remain weak.

And because inventories are now close to desired levels, a renewed depletion of stocks is also unlikely, it said.

Based on the most recent data, the OECD said U.S. economic growth is expected to rise by an annualized 2.0 percent in the third quarter, but then moderate to 1.2 percent in the fourth quarter.

 


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