OECD hikes global growth forecast as vaccines roll out
The huge US stimulus package is also a factor that has the group seeing 5.6% growth in 2021 and 4% in 2022
Paris — The global economic outlook has brightened as Covid-19 vaccine rollouts speed up in some countries and the US launches a vast new stimulus package, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday, hiking its forecasts.
The world economy is set to rebound in 2021 with 5.6% growth and expand 4.0% in 2022, the OECD said in its interim economic outlook.
This marked a sharp increase from its last outlook in early December 2020, when the Paris-based policy forum forecast global growth of 4.2% for 2021 and 3.7% for 2022.
But significant risks loom over the improved outlook, notably in the form of how fast authorities get vaccine shots to people, how soon restrictions are lifted, and whether new variants of the coronavirus are kept in check.
“Not vaccinating fast enough risks undermining the fiscal stimulus put in place,” OECD chief economist Laurence Boone told an online news conference.
Singling out Europe for its slow rollout, she said government money injected into the economy risked ending up in consumers’ savings if they cannot return to more normal lives soon.
Global GDP was seen returning to pre-pandemic levels by the middle of 2021, albeit with large divergences between countries.
“The pace of vaccinations is not fast enough to consolidate the recovery, we need to go much faster and we need to do much better,” Boone said.
While the vaccine rollout would give a shot in the arm to the global economy, the US’s planned $1.9-trillion stimulus package would cascade down to other countries, adding more than a percentage point to global growth.
The US economy would grow 6.5% in 2021 and 4.0% in 2022, the OECD said, ramping up its forecasts from expectations in December 2020 for 3.2% in 2021 and 3.5% in 2022.
The OECD estimated the package, which includes $400bn in one-time payments of $1,400 to many Americans, would boost US output by about 3% to 4% on average in its first full year.
With public money flooding into the world’s biggest economy, the package could lead to the creation of up to 3-million US jobs by the end of 2021 but could also increase inflation by 0.75 percentage points per year on average in the first two years.
Meanwhile, the stimulus would be a boon for the US’s major trading partners, boosting growth by 0.5-1 percentage points in Canada and Mexico, and between 0.25 and 0.5 in the euro area and China, the OECD said.
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