OECD countries recorded a 2.1% drop in real GDP during the first quarter of 2009-the largest fall in GDP since the OECD began collecting this data in 1960. The quaterly loss followed a 2% slump the previous quarter-that was already a record. US GDP fell 1.6% in both the last quarter of 2008 and the first quarter of 2009, while GDP in Japan sunk a total of 7.8% in the six months to April 2009.
The decline was even more dramatic when compared to the same quarter a year ago. By that measure, economic output across the OECD area dropped 4.2% in the year to April 2009.
Of the G7 countries, only in France, where GDP fell 1.2%, did the rate of contraction ease in the first quarter. In general, though, GDP in the euro area was down 2.5%, following a 1.6% fall in the previous quarter.
Meanwhile, as a modicum of positive news, OECD composite leading indicators for April 2009 point to a reduced pace of deterioration in most of the OECD economies, with stronger signals of a possible bottoming out in Canada, France, Italy and the UK. The leading indicators for the OECD area increased by 0.5 point in April 2009 compared with March, but stood 8.3 points lower than in April 2008. That was slightly less pronounced than the fall in the year to March. The leading indicators for the US were 10.8 points lower than a year ago, while the indicators for Japan were 11.9 points lower. In the euro area, the difference from a year ago was slightly less dramatic, at 6.3 points lower. For more detail, see www.oecd.org/statistics.
Merchandise trade flows in the G7 area took an unprecedented drop in the final quarter of 2008, but there was a slowdown in the rate of decline during the first quarter of 2009. In the US, export volume growth dropped 7.8% and imports fell 5.1%, while Japanese exports plunged by 19.1% quarter-on-quarter, twice the rate of the G7.
Meanwhile, consumer prices in the OECD area rose by 0.6 % in the year to April 2009, compared with 0.9 % in the year to March. Month-on-month, prices rose by 0.2% in April after 0.3% in March 2009. Consumer prices for energy were down by 13.3% in the year to April 2009, following a fall of 11.9% in March. Consumer prices for food were up by 3.3% in the year to April compared with a 4.5% increase in March. Excluding food and energy, consumer prices rose by 1.9% in the year to April 2009, compared with 1.8% in March 2009.
The unemployment rate edged up in the OECD area to reach 7.8% in April 2009, 0.1 percentage point higher than in March and 2.2 percentage points higher than a year earlier. In the year to April 2009, euro-area unemployment rose by nearly 2 points, while unemployment in the US climbed 3.8 percentage points.
Could gender stereotypes influence subject choice at school and subsequent careers? The OECD's PISA (Programme for International Student Assessment) tests of 15-year-olds finds that boys are more likely to take up computer sciences and girls to go into life sciences, despite the fact that boys and girls perform almost identically in life sciences at school.
Meanwhile, the sciences, in general, don't seem to have what it takes to attract either gender, which is not encouraging news for productivity and innovation. Across OECD countries, close to 40% of high-school students who come top in science subjects have no interest in pursuing a science-related career, while almost 45% do not want to continue studying science.
For more, see www.oecd.org/education
Bermuda and the Netherlands recently signed a bilateral agreement to exchange information for tax purposes. Bermuda was one of the first jurisdictions to commit to the international standard of transparency and exchange of information in May 2000, and one of the jurisdictions that helped to develop the Model Agreement on Exchange of Information in Tax Matters in 2002.
Luxembourg, too, stepped up its efforts to combat tax abuse and excessive bank secrecy recently by signing protocols to strengthen its exchange-ofinformation agreements with Denmark, France and the Netherlands.
Meanwhile, at a May meeting of the OECD's Forum on Tax Administration, tax authorities from around the world agreed on a new plan to encourage tax compliance, focusing on banks, wealthy individuals and offshore activities. "Individuals who hide assets overseas can expect an increasing number of revenue bodies to co-operate and share information to ensure people pay their fair share to help fund governments worldwide," said Douglas H. Shulman, commissioner of the US Internal Revenue Service and a participant at the Forum. See www.oecd.org/tax and see Spotlight on taxation, from page 21.
An action plan to support poor countries trying to cope with the economic and financial crisis has been launched by members of the OECD's Development Assistance Committee (DAC), the world's major donor countries, and other donors, at their meeting in Paris in late May. Donors pledged to honour their aid commitments and to work with recipient countries to support their longterm development strategies, invest in women, and consider more predictable funding for multilateral aid institutions.
France should prioritise getting unskilled young people into employment, according to a new report. Many French youths (18- 25 year-olds) are remote from the job market and run the risk of becoming a "lost generation", said Secretary-General Angel Gurría in launching the report in May.
Jobs for Youth: France is available at www.oecd.org/bookshop. See also www.oecd.org/employment
Australia should also move quickly to avert a major rise in youth unemployment, according to the OECD. Young Australians work more than in other OECD countries, but to boost career prospects the authorities should do more to encourage young people to stay in school after 16 for more skills and training. Jobs for Youth: Australia notes that between July 2008 and January 2009 youth (15-24) unemployment rose from 8.7% to 9.7%. Visit www.oecd.org/australia
Ireland's net official development assistance (ODA) was $1.3 billion in 2008, a 90% increase over 2003 in real terms. Ireland's aid grew from 0.39% of gross national income in 2003 to 0.58% in 2008 during a period of exceptional national economic growth. Ireland has been aiming to join a small group of OECD countries by reaching the UN recommended target of 0.7% of GNI, a target made more difficult by the economic downturn. The report praises Ireland for its efforts in making aid more effective and its focus on reducing poverty in some very poor African countries.
Change of heart-
"Is French health system a model for US?" Headline in article by Jim Landers in Dallas News, 18 May 2009.
"Politicians around the world do not appreciate how the supply side of green technology works." Don Burbar of Avalon Rare Metals, quoted in The Times, 28 May 2009.
"Men, especially young men, made a mess of things." Kristjan Kristjansson, spokesman for Iceland's prime minister, Johanna Sigurdardottír, on the financial crisis, in the Washington Post, 10 February 2009.
"More and cheaper electricity; these are the new prospects."
"Towards a European market in electricity", No 1, November 1962
©OECD Observer No. 273, June 2009