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World | Dec 6, 2020

OECD projects 4.2% growth in global economy in 2021

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The Organisation for Economic Cooperation and Development (OECD), which represents the larger and more developed countries of the world, is projecting that growth in the global economy by as much as 4.2% in 2021.

They based their projection on a bounce back from the coronavirus pandemic, which latest projection indicates that the global economy is expected to decline by the said figure of 4.2% this year.

OECD Secretary-General, Ángel Gurría reported at a news conference in Paris on Tuesday that while the outlook appeared “vigorous” almost all countries will have smaller economies at the end of 2021 than at the end of 2019.

Gurría said recent vaccine announcements had provided much-needed hope. However, he stressed that many countries are still fighting a resurgence of the virus.

OECD Secretary-General Ángel Gurría. (Photo: Herve Cortinat/OECD)

The OECD Secretary-General pointed out that with the re-imposition of containment measures in some countries; this is putting a dent in the economic rebound that had begun.

Global growth out-turn is expected to be 3% below last year

In a recent report, the OECD said global Gross Domestic Product (GDP) in the fourth quarter of 2020 is expected to be 3% below the same quarter last year, while for the Euro area and the United States, the decline is projected to be 7.3% and 3.2%, respectively.

The OECD had earlier reported that global trade had rebounded sharply in the third quarter with merchandise exports up 21.6% and imports up 18.1%.

However, the OECD report showed that international trade remains around 5% below its pre-pandemic level in the final quarter of 2019 and close to 10% below the most recent high seen in the third quarter of 2018.

This activity, according to the report, will continue to be restricted with social distancing and partly closed borders most likely remaining through the first half of 2021.

The grouping of development countries is warning that the recovery will be uneven across countries and sectors and could lead to lasting changes in the world economy. The OECD was quick to note that countries with solid coronavirus testing, tracking and isolation programmes, that are able to effectively distribute vaccines, should perform comparatively well.

OECD suggestion to policy makers 

The OECD has suggested that policymakers need to maintain fiscal and public health support, adding that the 2020 economic damage would have been much worse, had it not been for massive government support to help people and businesses.

The prediction is for a 2021 rebound in global gross domestic product, which will be led by a strong recovery in China, which, along with Korea, has handled the pandemic better than most countries.

In contrast, the United States and Europe are expected to contribute less to the recovery than their weight in the global economy. Among the world’s major economies, only Argentina is predicted to do worse than the United Kingdom. The OECD expects that by the end of 2021, the UK economy will be 6% smaller than before the coronavirus pandemic.

Failure by the United Kingdom to conclude a trade deal with the European Union would “entail serious additional economic disturbances in the short term and have a strongly negative effect on trade, productivity and jobs in the longer term”, the OECD report said.

The report also warned that corporate debt is reaching levels last seen in the global financial crisis of a decade ago, raising the risk of insolvencies but also cutting firms’ capacity to invest, which would weaken a broader economic recovery.

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