Raises world GDP growth forecast to 5.8%
A strengthening world recovery from the Covid-19 pandemic risks leaving behind many regions, fuelling inequalities across and within borders, the Organization for Economic Cooperation and Development said Monday.
As the Paris-based group revised up its 2021 global growth forecast to 5.8 per cent from 5.6 per cent, it warned of gaping differences that mean living standards for some people won’t return to pre-crisis levels for an extended period.
In countries including Argentina and Spain, more than three years will elapse between the onset of the pandemic and a recovery of per-capita economic output, according to the new projections. That compares to just 18 months in the US and under a year in China.
“It is with some relief that we can see the economic outlook brightening, but with some discomfort that it is doing so in a very uneven way,” OECD Chief Economist Laurence Boone said. “The risk that sufficient post-pandemic growth is not achieved or widely shared is elevated.”
The assessment sounds a note of caution as confidence surges in the world’s richest countries with the lifting of restrictions and the acceleration of vaccination campaigns. The OECD praised governments for exceptionally swift and effective policy support that is now fuelling a rebound in trade, manufacturing and consumer spending. That will limit the scars the crisis leaves behind, the 38-member organization said.
But it warned the problem of diverging fortunes could worsen further because of a failure to get enough vaccines and support to emerging and low-income economies, which already have less capacity to absorb shocks and could face sovereign funding issues.
Global growth will be led by a strong upturn in the US, where GDP is forecast to reach 6.9 per cent this year, before easing to 3.6 per cent in 2022, the OECD added. In the UK, while GDP is predicted to return to pre-pandemic levels next year, the OECD warns that increased border costs following Brexit will hit foreign trade. Unemployment is also expected to peak at the end of 2021, with a predicted rise to 6.1 per cent when the furlough scheme ends. It will reach an average of 5.4 per cent in 2021, above 2020 levels of 4.5 per cent and 2019 levels of 3.8 per cent.
Without inoculations in all countries, the OECD said new variants and renewed lockdowns could hit confidence, plunge activity back into a disruptive stop-go pattern, and bankrupt firms.“The rebound is pretty solid, pretty robust, but it depends crucially on whether we can keep up the rhythm of vaccination: it’s vaccination, vaccination, vaccination,” OECD Secretary General Angel Gurria said.