Years of stagnation are over for the global economy and a strong economic recovery is well under way in the United States, where the dynamic "animal spirits" of times past are back in action, the OECD says.
In its twice-yearly Economic Outlook, the Organisation for Economic Cooperation and Development this morning predicted pacy growth of 4.2 per cent in the US economy in 2004 after 2.9 per cent this year - compared to a paltry 0.3 per cent in 2001 for example.
Japan is poised to pull out of the doldrums with growth of 2.7 per cent this year and 1.8 per cent in 2004 but the 12-nation euro zone will get off the ground a bit more slowly with growth of 0.5 percent this year and 1.8 percent in 2004, the OECD said.
"We're at last seeing recovery in both the United States and Japan," OECD chief economist Mr Jean-Philippe Cotis said in an interview about the report in which he predicted that the main central banks would keep interest rates low for months to come until the rebound was more full-blown.
"In Europe, it's a fledgling recovery and it will need to be carefully nurtured," the report said, warning also that the euro zone and other regions with large public deficits should use the recovery to clean up their public finances.
"Looking further ahead, the most likely scenario for the next two years is one of sustained growth in the United States and progressive recovery in Europe and Japan, in a context of low inflationary pressures and with a gradual reduction in unemployment," the report said.
Notably, the report made little major reference to the war in Iraq and political instability in the world in general.
It added a glum note on jobs for the near future, however.
"Global economic growth is unlikely to be strong enough to make major inroads into unemployment in the very near term."
It predicted a jobless rate declining in the United States to 5.2 percent in 2005 from 6.1 percent this year, and a slight drop in Japan's jobless rate to 5.0 percent in 2005 from 5.3 percent this year. For the euro zone the rate was predicted to rise to 9.0 percent next year from 8.8 percent this year before falling back to 8.7 percent in 2005.
One of the big risks highlighted by the OECD, a free-market forum whose 30 mostly industrialised member countries account for the bulk of world output and wealth, was the large U.S. current account deficit and sliding value of the dollar.
"Under such delicate circumstances, a sudden weakening of the dollar could stifle a fledgling European recovery," it said.
"This would exacerbate the unevenness of the global upturn while not doing much to help reduce current account imbalances or tensions in the trade policy arena."
World trade was also starting to pick up, the OECD said.
"Growing imports from non-OECD Asian economies should play an increasingly supportive role in the global recovery," it said. Japan and South Korea are the only two Asian countries that are OECD members.
"Growth is projected to remain rapid in China, at over seven percent," the report said, adding that growth should pick up to near five percent by 2005 in the wider Asian region comprising China, Indonesia, Thailand, Singapore and the Philippines.
The OECD said Russia too should see brisk growth, of about five percent next year and the year after as long as there were no major upsets of the kind caused by the Kremlin crackdown on oil giant Yukos, which shook financial market confidence.
Latin America was also looking up, it said.