The global economy is expected to build momentum over the coming two years, with real gross domestic product (GDP) growth projected to reach pre-pandemic levels by the end of 2021, according to the Organisation for Economic Cooperation and Development (OECD), which recently cited progress with coronavirus vaccines and unprecedented government and global bank action to mitigate the economic impact of the crisis.

OECD said the economic recovery would be uneven across countries, however, ‘potentially leading to lasting changes’ in the world economy.
It said China is expected to account for over a third of world economic growth in 2021, while the contribution of Europe and North America ‘will remain smaller than their weight in the world economy’.

“For the first time since the pandemic began, there is now hope for a brighter future,” OECD said.

“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, firms and countries,” the organisation said in its latest economic outlook.

OECD said it expects the global economy to contract by 4.2 per cent this year. That reflects an upward revision from an estimate made in September that pointed to a 4.5 per cent fall in real GDP.

Looking ahead, the group said worldwide economic growth would average 4 per cent over the next two years. It expects real GDP growth to hit 4.2 per cent in 2021—trimmed from a September forecast of 5 per cent—and 3.7 per cent in 2022.

It warned ‘considerable’ uncertainty remains, however, and urged policymakers around the world to maintain targeted support to vulnerable children, people and businesses to reduce the risk of the coronavirus crisis ‘leaving scars’.

It cited scientific progress, pharmaceutical advances and adjustments in the behavior of people and firms, among others, as factors likely to help keep the virus in check, allowing strict restrictions on mobility to be lifted progressively.

OECD said it sees China, which started recovering earlier than its peers, recording economic growth of 1.8 per cent this year. It remains the only major economy expected to record economic growth in 2020.

The world’s second-largest economy is projected to record real GDP growth of 8 per cent next year and 4.9 per cent in 2022. By comparison, the United States is expected to record an economic contraction of 3.7 per cent in 2020, before posting growth of 3.2 per cent in 2021 and 3.5 per cent in 2022.

The euro area was seen reporting real GDP of minus 7.5 per cent this year, 3.6 per cent in 2021 and 3.3 per cent in 2022.

“Despite the huge policy band-aid, and even in an upside scenario, the pandemic will have damaged the socio-economic fabric of countries worldwide,” OECD said in its report.

“People living in poverty and usually less well covered by social safety nets have seen their situation deteriorate even further. Children and youth from less well-off backgrounds, and less qualified adult workers have struggled to learn and work from home, with potentially long lasting damage.”

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

Fibre2Fashion News Desk (DS)

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