The Organisation for Economic Co-operation and Development says the global economic outlook for the year is less than earlier feared, as the body reduces the global economic decline for the year at 4.5%, compared to previous estimates of 6%.
This was disclosed in the OECD Interim Economic Outlook published on Wednesday. They also forecast that the global economy will grow by 5% in 2021.
“The Interim Economic Outlook projects global GDP to fall by 4½ per cent this year, before growing by 5% in 2021. The forecasts are less negative than those in OECD’s June Economic Outlook, due primarily to better than expected outcomes for China and the United States in the first half of this year and a response by governments on a massive scale,” the OECD said.
The group says economic output for most of the world by 2021 will still be bellow pre-COVID-19 levels and “well below what was projected prior to the pandemic”.
OECD says economic output recovered fast after the collapse in the first half of the year, due to the easing of containment measures and the initial re-opening of businesses. They warn that the pace of economic recovery is dying out due to second outbreaks of the virus leading to newer lockdown restrictions.
“Uncertainty remains high and the strength of the recovery varies markedly between countries and between business sectors. Prospects for an inclusive, resilient and sustainable economic growth will depend on a range of factors including the likelihood of new outbreaks of the virus, how well individuals observe health measures and restrictions, consumer and business confidence, and the extent to which government support to maintain jobs and help businesses succeeds in boosting demand.”
OECD Chief Economist Laurence Boone said: “The world is facing an acute health crisis and the most dramatic economic slowdown since the Second World War. The end is not yet in sight but there is still much policymakers can do to help build confidence.”
She urged that governments must avoid mistakes like tightening fiscal policy too quickly, citing that without government support, “bankruptcies and unemployment could rise faster than warranted and take a toll on people’s livelihoods for years to come.”
“Policymakers have the opportunity of a lifetime to implement truly sustainable recovery plans that reboot the economy and generate investment in the digital upgrades much needed by small and medium-sized companies, as well as in green infrastructure, transport and housing to build back a better and greener economy,” she added.