OECD lifts outlook on vaccine progress, sees China spur recovery

LONDON – The Organization for Economic Co-operation and Development (OECD) expects the global economy to gain momentum over the next two years, with real gross domestic product (GDP) growth expected to reach pre-pandemic levels by the end of 2021.

“For the first time since the start of the pandemic, there is now hope for a better future,” the OECD said on Tuesday, citing the progress made with coronavirus vaccines and the unprecedented action of the government and global banks to mitigate the economic impact of the crisis.

“The worst has been avoided, most of the economic fabric has been preserved and could revive quickly, but the situation remains precarious for many vulnerable people, businesses and countries.”

In its latest economic outlook, the OECD said it expects the global economy to contract 4.2% this year. This reflects an upward revision from an estimate made in September which indicated a 4.5% drop in real GDP.

Looking ahead, the group said global economic growth will average 4% over the next two years. He expects real GDP growth to reach 4.2% in 2021 – compared to September’s forecast of 5% – and 3.7% in 2022.

He warned, however, that “considerable” uncertainty remained and urged policymakers around the world to maintain targeted support for vulnerable children, people and businesses to reduce the risk of a “scarring” coronavirus crisis.

The OECD, which monitors and advises its 37 member countries on economic policy, has expressed cautious optimism that the global economy will grow through 2022.

He cited scientific advancements, pharmaceutical advancements, and behavioral adjustments of people and businesses, among others, as factors that could help keep the virus under control, allowing strict restrictions on mobility to be gradually lifted.

Combined with the reduction in uncertainty and the exceptional fiscal relief provided throughout 2020, which the OECD expects to “pay generously”, the rebound in the global economy is expected to continue to intensify as that more and more activities will reopen.

Several encouraging developments in the race to deliver a safe and effective coronavirus vaccine have been announced in recent weeks, raising hopes that the world may soon return to some semblance of normalcy.

It is hoped that coronavirus vaccines will help end the pandemic that has wiped out part of the global economy and claimed more than 1.46 million lives worldwide.

The OECD said, however, that economic recovery would be uneven across countries, “potentially leading to lasting changes in the global economy.”

He said China is expected to account for more than a third of global economic growth in 2021, while the contribution of Europe and North America “will remain below their weight in the global economy.”

The OECD said it sees China, which has started to recover earlier than its peers, registering economic growth of 1.8% this year. It remains the only major economy expected to record economic growth in 2020.

The world’s second-largest economy is expected to register real GDP growth of 8% next year and 4.9% in 2022.

By comparison, the United States is expected to experience an economic contraction of 3.7% in 2020, before posting growth of 3.2% in 2021 and 3.5% in 2022.

The euro area recorded real GDP of -7.5% this year, 3.6% in 2021 and 3.3% in 2022.

“Despite the enormous political band-aid, and even in a rising scenario, the pandemic will have damaged the socio-economic fabric of countries around the world,” the OECD said in its report.

“People living in poverty and generally less well covered by social safety nets have seen their situation deteriorate even further. Children and young people from less privileged backgrounds and less skilled adult workers have found it difficult to learn and work from home, which could be a shame for a long time. “

The OECD has said governments should use their policy instruments to actively ensure that those hardest hit by the coronavirus crisis receive the support they need.