OECD says economic recovery tied to vaccine success

1 Dec 20

The global economy is expected to grow by 4.2% next year, although performance will depend on how quickly Covid-19 vaccines are rolled out, according to the OECD.

Image: Vaccine by VCU Capital News Service under CC BY-NC 2.0

The organisation’s latest economic outlook said that GDP across the world is projected to rise a further 3.75% in 2022.

Its positive central forecast comes after a contraction of 4.25% in the current year, due to the effect of the pandemic.

A statement from the OECD said: “The release of pent-up demand and accumulated savings may reinforce a rebound if vaccines become available faster and more widely, boosting global growth to around 5% in 2021.

“But confidence may be hit if problems arise with the distribution or unexpected secondary effects of the vaccines and if the lessons from the first two waves of the pandemic are not learnt.

“In this scenario, global growth would be lowered by 2.75 percentage points.”

Despite the optimism, the OECD said that even in its upside scenario, the pandemic will have damaged the socio-economic fabric of countries worldwide – possibly permanently.

“Output is projected to remain around 5% below pre-crisis expectations in many countries in 2022, raising the spectre of substantial permanent costs from the pandemic,” it said.

Recovery is likely to be unevenly spread, with countries running effective testing, tracking and isolation programmes likely to do better, the report said.

OECD chief economist Laurence Boone said: “With the prospect of vaccines and better virus management, the picture for the global economy is looking brighter, but the situation remains precarious, especially for the low-skilled and for struggling small businesses.”

The outlook showed that Covid-19 has worsened economic inequality, hitting the most vulnerable hardest.

With interest rates at record lows, the OECD called for greater investment in health services, social safety nets and training, plus grants and equity support to businesses.

The report also found that corporate debt is now reaching levels last seen in the global financial crisis a decade ago, which could lead to insolvencies and cut investment, weakening any potential economic recovery.

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