The global economy is growing far more strongly than anticipated a year ago but the recovery remains uneven, exposing both advanced and emerging markets to a range of risks, according to the Organisation for Economic Cooperation and Development’s (OECD) latest Interim Economic Outlook. OECD projected a strong global growth of 5.7 per cent this year and 4.5 per cent in 2022.

The projection is little changed from its May 2021 outlook of 5.8 per cent and 4.4 per cent respectively.

Countries are emerging from the crisis with different challenges, often reflecting their pre-COVID 19 strengths and weaknesses, and their policy approaches during the pandemic. Even in the countries where output or employment have recovered to their pre-pandemic levels, the recovery is incomplete, with jobs and incomes still short of the levels expected before the pandemic, the OECD document said.

There is a marked variation in the outlook for inflation, which has risen sharply in the United States and some emerging market economies but remains relatively low in many other advanced economies, particularly in the euro area.

Consumer price inflation in the G20 countries is projected to peak towards the end of 2021 and slow throughout 2022. Wage growth remains broadly moderate and medium-term inflation expectations remain contained.

The report warns that to keep the recovery on track stronger international efforts are needed to provide low-income countries with the resources to vaccinate their populations, both for their own and global benefits.

Macro-economic policy support is still needed as long as the outlook is uncertain and employment has not yet recovered fully, but clear guidance is called upon from policymakers to minimise risks looking forward.

Central banks should communicate clearly about the likely sequencing of moves towards eventual policy normalisation and the extent to which any overshooting of inflation targets will be tolerated.

The report says fiscal policies should remain flexible and avoid a premature withdrawal of support, operating within credible and transparent medium-term fiscal frameworks that provide space for stronger public infrastructure investment.

Fibre2Fashion News Desk (DS)

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