PARIS: The Organization for Economic Cooperation and Development has offered a dim ray of hope to beleaguered Western economies by claiming the outlook for next year is "not that bad", despite the slowdown in housing markets and the ever-tightening credit squeeze.

In its half yearly report on the global economy, the OECD forecast the combined GDP of its 30 members will slow to 2.3% next year from 2.7% in 2007.

This latest estimate is a revision down from the May report, which predicted its members' combined GDP would expand at the same rate as this year.

The OECD cut its 2008 forecasts for the US, the euro zone and Japan, and forecast only a slight improvement in its members' economic growth in 2009, to 2.4%.

But, low unemployment rates, high corporate profits, and strong growth in developing economies will offset the current financial turmoil, it says.

In addition, it predicts the US will avoid recession. Says Jorgen Elmeskov: "Although near-term growth has been revised down...the actually not that bad in view of recent shocks."

China's economy is highlighted in the report as in danger of overheating and the Beijing authorities are urged to allow the yuan to appreciate more rapidly than in the recent past.

Elmeskov adds: "It's in the interest of the Chinese, if they want to stabilize their prices, to have tighter monetary conditions, that is to say let the currency appreciate some more."

Data sourced from Wall Street Journal Online; additional content by WARC staff