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World economy back to pre-pandemic level in 2021: OECD
PARIS, Dec 1, 2020 (BSS/AFP) – The global economy may get back to pre-
pandemic levels by the end of next year as vaccines help propel recovery, but
growth is likely to be uneven, the OECD said Tuesday.
Signs that vaccines could now be weeks away from distribution have
injected cautious optimism as the year limps to a close with Covid-19 having
claimed some 1.4 million lives.
“For the first time since the pandemic began, there is now hope for a
brighter future,” OECD Chief Economist Laurence Boone wrote in her
introduction to the organisation’s latest review of the global economic
outlook.
“Progress with vaccines and treatment have lifted expectations and
uncertainty has receded,” she said, acknowledging that virus containment
measures would likely be necessary for some months to come.
“The road ahead is brighter but challenging,” Boone added.
– ‘Unprecedented’ action –
The Organisation for Economic Co-operation and Development now sees world
output dropping by 4.2 percent this year thanks to the months-long lockdowns
that slowed the spread of the coronavirus but threw a wrench into the global
economy.
But it forecasts the world economy to snap back with 4.2 percent growth in
2021.
The forecasts for the contraction and the recovery are both more modest
than those its September update, despite many countries imposing new
restrictions to slow the spread of the coronavirus.
The OECD, which advises its 37 member nations on stimulating economic
progress and world trade, credited the quick recovery to “unprecedented”
action by governments and central banks.
“Without massive policy support, the economic and social situation would
have been calamitous,” Boone said.
She said that support “will pay off handsomely” in the coming months.
“The rebound will be stronger and faster as more and more activities re-
open, limiting the aggregate income loss from the crisis,” Boone said.
– China star performer – But that rebound is likely to be uneven and may
lead to lasting changes in the world economy, the OECD warned.
China is likely to be the only major economy to escape a contraction this
year, with its economy growing by 1.8 percent and then surging by 8.0 percent
in 2021.
On the other hand, the US economy will contract by 3.7 percent this year
but is only likely to manage 3.2 percent growth in 2021.
The eurozone will make up even less lost ground. After a 7.5 percent
contraction in 2020, it is expected to grow just 3.6 percent in 2021.
Japan is expected to fare similarly, with a 5.3 percent contraction in
2020 followed by a 2.3 percent rise in 2021.
Even other major emerging nations are also expected to only slowly
recover.
Brazil’s 6.0 percent drop this year is likely to be followed by only 2.6
percent growth in 2021.
India is seen as doing better, with its 9.9 percent drop this year to be
followed by a 7.9 percent rebound.
Overall, China is expected to account for one-third of global growth next
year, while Europe and North America are expected to contribute less than
their weight in the global economy.
– Social impact –
Despite the expected imminent distribution of vaccines, the global
economic outlook remains “exceptionally uncertain” said the OECD given the
difficulties of rolling out massive vaccination campaigns, uncertainties
about how long the vaccines will provide protection and the need to impose
restrictions in the meantime.
The OECD also sounded the alarm about the social impact of the pandemic
crisis which has seen many people thrown out of work.
“Despite the huge policy band-aid, and even in an upside scenario, the
pandemic will have damaged the -economic fabric of countries worldwide,” said
Boone.
She urged governments not to let up on support measures as Covid-19
vaccines become available even as public debt levels soar to unprecedented
levels.
“Heightened policy activism need not be a concern if deployed to deliver
higher and fairer growth,” Boone said, noting that the cost of debt is at
record lows.
The OECD urged governments to focus their efforts on essential goods and
services such as education, health, physical and digital infrastructure that
lay the foundations for growth.
It also called for decisive actions to reverse the rise in poverty and
income inequality and a return to international cooperation.
BSS/AFP/FI/ 1650 hrs