The Organization for Economic Co-operation and Development (OECD) has updated its global economic outlook, projecting a contraction of 4.2 percent this year.
This is an improvement from its previous estimate of 4.5 percent, as success in vaccine trials increase expectations for a rapid recovery.
As lockdowns and an uptick in coronavirus cases across the globe crimp expansion, the organization expects the global economy to expand 4.2 percent in 2021, down from an earlier estimate of 5 percent. In 2022, the global economy is expected to rise by 3.7 percent.
“The prospect of a number of COVID-19 vaccines becoming widely available next year has lifted hopes for a faster recovery, but policymakers will need to retain both public health and fiscal support while acting decisively for the momentum to pick up,” the Paris-based organization said in its latest Economic Outlook.
The OECD cautioned that the recovery “will be uneven across countries and sectors and could lead to permanent changes in the world economy.”
“Countries with effective programs for testing, monitoring and isolation and where effective vaccinations can be quickly distributed should perform relatively well, but there is still a high degree of uncertainty.”
China, at 1.8%, will be the only OECD-covered country to see growth this year. The US, the largest economy in the world, will contract by 3.7 percent. While the euro area is set for a 7.5 percent fall, the UK will shrink by 11.2 percent. Among the G20 countries, the economy of Saudi Arabia will contract by 5.1 percent and India by 9.9 percent.
The US economy will grow by 3.2 percent in 2021, while the UK economy will expand by 4.2 percent. The EU is projected to report 3.6 percent growth, with India’s economy rising by 7.9 percent and Saudi Arabia increasing by 3.2 percent.
According to the OECD, the overall global gross domestic product (GDP) will rebound to pre-crisis levels by the end of 2021, driven by a strong recovery in China, which is projected to rise by 8%.
“Building back better requires leadership and action to build on the promises of vaccines, and to relaunch multilateral negotiations on trade, climate and digital standards to pave the way for a more sustainable growth and a society where opportunities are available for all,” OECD secretary-general Angel Gurria, said.
The OECD has cautioned that corporate debt is approaching levels last seen during the global financial crisis a decade ago, rising the risk of insolvencies and reducing the ability of businesses to invest, thus undermining the wider economic recovery.
According to data, the coronavirus pandemic has killed more than 1.47 million individuals globally and infected about 64 million. It has wiped out millions of jobs, plunged people into deep poverty, and driven the global economy into a sharp downturn.
Need for determined action
The organization called for policymakers’ to take ‘determined action’ to expand public health programs, as well as funding for the disadvantaged through the extension of social safety nets and the improvement of youth and low-skilled workers’ training.
Businesses should be supported through grants and equity rather than loans, which add to the existing debt, it said.
The Organization for Economic Co-operation and Development is an intergovernmental economic organization with 37 member countries, founded in 1961 to stimulate economic progress and world trade.