The Organisation for Economic Co-operation and Development (OECD) on Tuesday sharply raised its global growth forecast for this year, as the deployment of vaccines and a huge US stimulus program have greatly improved economic prospects.
The Paris-based organization said that it now forecasts the global economy would grow 5.6 percent, an increase of 1.4 percentage points from its forecast in December last year.
“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries and signs that economies are coping better with measures to suppress the virus,” it said in a report.
Photo: EPA-EFE
The world recovery would be largely carried by the US, thanks to US President Joe Biden’s US$1.9 trillion stimulus program, OECD chief economist Laurence Boone said.
The OECD now sees the US economy climbing 6.5 percent this year, an increase of 3.3 percentage points from its previous forecast.
Boone said the US recovery accounts for 1 percentage point of the global growth revision.
The OECD said that global output could rise above the pre-pandemic level in the middle of this year. However, it noted increasing signs of divergence between countries as some nations are faster to roll out vaccines while others employ containment measures.
“Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022,” the OECD said.
For the moment, only China, India and Turkey have surpassed pre-pandemic levels of economic output, it said.
The “top policy priority” is to deploy vaccines as quickly as possible throughout the world, to save lives as well as to speed up economic recovery, the organization said.
“There are huge and significant risks to our economic projections, most notably the pace of vaccination,” Boone said.
“What we know if the faster countries vaccinate, the quicker they can reopen their economy,” she said, adding that Europe should speed up its vaccination efforts.
Britain, which has also rolled out vaccines quickly, got a 0.9 percentage point increase to 5.1 percent — higher than the UK’s own forecast, which was lowered last week.
The eurozone, where vaccination campaigns have been slower, received only a 0.3 percentage point bump to 3.9 percent, as the recoveries in Italy and France were revised lower.
The OECD also urged advanced nations to step up their efforts to aid poorer countries to obtain vaccines and get inoculated.
“The resources required to provide vaccines to lower-income countries are small compared with the gains from a stronger and faster global economic recovery,” the OECD said.
The forecast for China was also revised lower, by 0.2 percentage points, to 7.8 percent.
The OECD said that fiscal and monetary policy should remain supportive of recoveries.
Concerning inflation, the threat of which has caused markets to swoon in recent weeks, the OECD said that underlying price pressures generally remain mild and are being held in check by ample spare capacity around the world.
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