Global economy’s recovery to be ‘significant but uneven’: OECD

1 June, 2021 12:00 AM printer

PARIS: The global economy is set for a “significant but uneven” recovery this year due to swift policy actions and rapid Covid-19 vaccine distribution in some countries, though headwinds still persist, the Organisation for Economic Cooperation and Development (OECD) said.

The world economy is projected to rebound 5.75 per cent this year and nearly 4.5 per cent in 2022, following a 3.5 per cent contraction in 2020, the 37-member country OECD said on Monday in its economic outlook. That marks a slight increase from its March forecast when the Paris-based policy forum estimated an expansion of 5.6 per cent in 2021, report agencies.

In April, the International Monetary Fund raised its global economic outlook forecast to 6 per cent this year, compared with a previous forecast of 5.5 per cent.

A fast-growing manufacturing sector, strong rebound in trade as borders reopen, a gradual resumption of travel, a surge in consumption and higher number of hours worked are encouraging signs and should “limit the scars” from the crisis, the OECD said.

“The world economy is currently navigating towards the recovery, with lots of frictions,” Laurence Boone, OECD chief economist, said. “The risk that sufficient post-pandemic growth is not achieved or widely shared is elevated.”

While the global economy has returned to pre-pandemic activity levels, it remains below its pre-pandemic growth path. In many OECD countries living standards by the end of 2022 will not return to the level expected before the crisis, the report showed.

Looming over the brighter economic outlook are risks related to the changing nature of the coronavirus, household savings and conditions in emerging market and developing economies, the OECD warned.

Emerging and low-income countries are not receiving enough vaccines, exposing them to a “fundamental threat” because they have a reduced capacity to provide support than more advanced economies, the organisation said.

A new and much-debated risk is the possibility of higher inflation as central banks and governments pump trillions of dollars to support economies. Commodity prices have been rising fast while bottlenecks in some sectors and disruptions to trade are creating price tensions, according to the OECD.

In addition, “substantial uncertainty” remains around new, more contagious and more fatal virus variants that are increasingly resistant to existing vaccines, unless effective vaccines are deployed quickly and widely.