Economy

OECD sees global economy turning the corner on coronavirus

December 03, 2020 01:15·
Shopper walking past distressed shop

Shopper walking past distressed shop

The OECD has called for greater cooperation among countries in the fight against the coronavirus, including on matters such as the distribution of vaccines and extending debt relief to poorer countries. "We're still in the midst of a pandemic crisis, which means that policy still has a lot to do", said OECD chief economist Laurence Boone.

That is likely to lead to further declines in economic activity in the short term in some countries, especially in Europe.

It predicts the global economy will shrink about 4.2 per cent this year and rebound by the same rate in 2021 before growing 3.7 per cent the following year.

Among the world's major economies only Argentina is predicted to do worse.

In its semi-annual report on economic perspectives, OECD forecast a 7 - 5,6% contraction.

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. Boone said monetary and fiscal support must be funnelled into stronger and better economic growth with investments in education, health, physical and digital infrastructure being a priority.

China will be the only country covered by the OECD to see any growth at all this year, at 1.8 percent, unchanged from the last forecast in September.

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The eurozone will make up even less lost ground. Its economy will see growth return in 2021 at 3.6% and 3.3% in 2022.

The government's official forecaster, the Office for Budget Responsibility, has projected a 2 percentage point reduction in GDP in 2021 if no deal is in place by 31 December.

The OECD in its report said that a number of Covid-19 vaccines are expected to be widely available in 2021, which has raised hopes that recovery is in sight.

China, which has brought its virus infections under control better than many major economies, will account for a big part of that economic recovery, while Europe, Japan and the USA will lag, the OECD said.

But she added that the "road ahead is brighter but challenging", with the recovery set to be uneven across the globe and the potential for a "severe" hit if vaccines prove ineffective in controlling the pandemic.

Low public debt and high fiscal reserves, combined with European Union funding, allow Bulgaria's government to sustain and expand its fiscal assistance, which is central to the strength of recovery, the OECD noted.

It also called for decisive actions to reverse the rise in poverty and income inequality and a return to worldwide cooperation.

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