At the same time, the Organization for Economic Co-Operation and Development expects Canada's economy to grow by 1.3 per cent in the third quarter and by 1.9 per cent in the fourth.
The OECD says the world economy is slowing, with key European countries entering a recession that’s having a global impact.
As a result, the agency says G7 economics may grow by a mere 0.3 in the third quarter and by just 1.1 per cent in the fourth quarter of the year.
The assessment warns that the euro zone crisis is dampening confidence, weakening trade and employment and slowing economic growth for both OECD and non-OECD countries.
The OECD projects that the euro zone's largest economies -- Germany, France and Italy -- will shrink one per cent on average in the third quarter and 0.7 per cent in the fourth.
The agency says while the United States is affected by the euro slowdown, growth is projected at an annualized rate of two per cent in the third quarter and 2.4 per cent in the fourth.
Japan’s economy is projected to contract by 2.3 per cent during the third quarter and hover around a zero growth rate in the fourth.
“Our forecast shows that the economic outlook has weakened significantly since last spring,” said OECD chief economist Pier Carlo Padoan.
“The slowdown will persist if leaders fail to address the main cause of this deterioration, which is the continuing crisis in the euro area.”
Padoan says the weak outlook is expected to push unemployment beyond today’s already high levels.
“Resolving the euro area’s banking, fiscal and competitiveness problems is still the key to recovery,” he said.
- By Alan Black in Toronto.