Prospects for the global economy are worsening more quickly than expected amid "a crisis of confidence," the head of the Organisation for Economic Cooperation and Development (OECD) said on Monday.
"Things became worse than we thought. We thought 2008 was going to be difficult for the first two quarters and then it was going to get better," said OECD secretary general Angel Gurria.
"Now everybody is saying 2008 is going to be difficult," he told reporters here, adding that business and consumer confidence have been badly damaged by the severe market turmoil sparked by the US subprime mortgage crisis.
"The problem is the crisis of confidence. This is going to take longer to sort itself out. Everybody becomes ultra cautious," he said.
He said that next year might be "a relatively low-growth year."
Gurria was speaking after the OECD published a report painting a relatively rosy picture of Japan's economic prospects, with gross domestic product (GDP) projected to grow by 1.6 per cent this year and by 1.8 per cent in 2009.
But Gurria said the OECD was considering downgrading its economic forecasts for all regions in light of the ongoing deterioration of the global economy.
He urged Tokyo to reform its tax system and labour market, and to pursue deregulation to encourage competition and improve productivity.
The OECD also urged Japan's central bank to keep interest rates low to enable the economy to continue its recovery from a decade-long slump. (AFP)
Global economy battling crisis of confidence: OECD