OECD warns of uneven economic recovery from COVID-19, despite global growth
Despite a brighter global economic outlook, the world risks an uneven exit from the COVID-19 pandemic unless vaccines are distributed equitably across the globe, the OECD has warned.
On Monday the Paris-based organisation published its latest Economic Outlook report and upgraded its forecasts for growth. Projected global GDP growth for this year was 5.8%, the OECD said. This is significantly more optimistic than the last report in December 2020, which forecast growth to be 4.2%.
The organisation upgraded its assessment of future growth too. Global GDP will increase by 4.4% in 2022, it predicted, compared with the 3.7% forecast last December.
But there was a note of caution amidst the optimism. “Effective vaccination programmes in many countries have meant today’s Economic Outlook is more promising than at any time since the start of this devastating pandemic,” said OECD Secretary-General Angel Gurría.
But, he added, “for millions around the world getting a jab still remains a distant prospect. We urgently need to step up the production and equitable distribution of vaccines.”
No ordinary recovery
“Prospects for the world economy have brightened but this is no ordinary recovery,” the outlook report noted, adding that some countries are recovering from the COVID-19 pandemic much quicker than others.
While the US and South Korea, for example, may return to pre-pandemic GDP per capita income levels around halfway into this year, South Africa and Argentina may struggle to the end of 2024 and beyond.
Public health policies to control the virus and vaccination strategies are proving to be essential for growth. “Countries that have been quick to vaccinate their population against COVID-19 and that are managing to control infections through effective public health strategies are seeing their economies recover more quickly,” the report noted.
But the uneven provision of vaccines puts the global recovery at risk. “While vaccination rates are progressing well in many advanced economies, poorer and emerging-market countries are being left behind. Unless everyone is protected, no one is protected,” the report added.
Economic factors
Differences in pandemic recoveries are also being driven by government economic support, and the degree to which countries rely on badly hit sectors like tourism, the OECD said.
While income support for people and businesses should remain, it needs to adapt to the health and economic situation and become more targeted in its support, said OECD chief economist Laurence Boone.
Thanks to low interest rates, the public debt countries have taken on to support their citizens and economies should be manageable and allow for investment in areas such as healthcare and climate change, the statement noted.
“Debt sustainability should be a priority only once the recovery is well advanced, but governments should start planning for an overhaul of public finance management,” said Boone. “Post-crisis policies should be reformed in depth to address more effectively today’s challenges and those ahead,” she added.
Another factor that has led to an uneven recovery identified in the report, is changes in global trade. “Consumers have been spending less on services and more on goods since the pandemic began,” the outlook said.
“The pick-up in merchandise trade has benefited countries heavily involved in supply chains, particularly pharmaceuticals, medical supplies and IT material,” it added. Korea, for example, has seen a 5% drop-off in services exports, but a 4.4% uptick in exports of goods, between the last quarter of 2019 and the first quarter of 2021.
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