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UPDATE 2-Gurria slashes OECD economy forecast, lauds tax moves

Published 03/27/2009, 08:03 AM

(Adds detail, background)

By Tamora Vidaillet

PARIS, March 27 (Reuters) - The Organisation for Economic Co-Operation and Development (OECD) will slash its 2009 forecast next week to show the 30-nation bloc's economy shrinking by 4.2 percent, General Secretary Angel Gurria said on Friday.

Economies around the globe would experience a "terrible" year and recent data had gone from bad to worse, said Gurria, adding to the ranks of those who have hacked away at forecasts as the economic crisis has deepened.

The OECD earlier predicted a 0.4 percent contraction.

The Paris-based OECD, which is funded by 30 countries including the United States, Japan and the rich industrialised nations of Europe, last issued economic forecasts in November and is due to publish its revised outlook on Tuesday.

"We know the numbers are going to be looking worse and worse every day, every time we measure. And we know it is going to be a terrible year," Gurria told reporters.

"What we should not do is act like we've been surprised, taken aback by the news ... every week, when a new piece of information comes out confirming what we know is going to happen," he said.

The crisis, which began as a financial one and is now slamming the whole economy, was hitting regions as far afield as Africa and Latin America irrespective of the soundness of domestic policies, he said.

In a wide-ranging discussion ahead of a summit of leaders of the Group of 20 old and new powers on April 2, Gurria also touched on the theme of the U.S. dollar, whose status as the world's reserve currency has been questioned.

"The dollar, as is usually the case, will have its ups and downs, but it will continue to be the reserve currency par excellence," he said.

TAX HAVENS

The summit was likely to yield concerted action, though the problems faced by governments could not be resolved with a magic wand, he said.

Governments needed to free up credit by dealing urgently with banks' bad assets, which included not only poor quality loans made at the height of the credit boom but also loans soured by the subsequent economic downturn.

The OECD has long campaigned for a crackdown on tax havens, and Gurria praised the G20 for taking up the issue, saying they had made more progress in 13 days in the run-up to the summit than in as many years.

"The OECD leveraged to the greatest possible extent the fact that there was going to be a G20 ... I can tell you, without the second of April, it wouldn't have been done," he said.

The OECD has supplied G20 countries with information showing which nations met its standards on cooperation in tax matters.

And as G20 governments have mulled whether or not to revise a blacklist of tax havens they would move against, countries from Monaco to Switzerland have pledged to relax bank secrecy.

Cracking down on tax evaders should allow governments to bolster revenues to fund massive stimulus packages. (Reporting by Tamora Vidaillet; Editing by Ruth Pitchford)

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