The OECD said today the global economy would bounce back later this year despite downside risks as German statistics showed Europe's largest economy shrank in the final quarter of last year.
The OECD's chief economist, Mr Ignazio Visco, told reporters at a convention in Rome that there would be a strong world recovery in the second quarter of 2002 but warned there was a possibility it would have to reduce its November forecast.
"There still are downward risks. This means that there are few possibilities of improvements and a greater probability of a worsening," he said.
In November, the Organisation for Economic Cooperation and Development forecast global growth of one per cent in 2002, rising to three per cent in 2003.
Mr Visco said the United States' economy was recovering faster than expected in the wake of the September 11th attacks on US consumer spending slightly above forecasts.
Mr Visco said the United States had already cut interest rates enough to rescue the economy but said the hawkish European Central Bank still had room to make further rate reductions.
But today's data releases from Germany were not encouraging.
Figures showed the German economy, formerly Europe's power house, contracted for the third quarter running at the end of 2001 to record its worst year for nearly a decade.
The German economy grew only 0.6 per cent last year after three per cent in 2000 as exports and investment fell in the global slowdown.
The slowdown has wreaked havoc with the country's budget deficit, which was 2.6 per cent of gross domestic product last year, and the EU may be about to warn that Germany's deficit is approaching the three per cent of national output danger level.