(Greenwich Merchant Bank): The Organisation for Economic Cooperation and Development (OECD) published a report on Tuesday, 1st of December 2020, on the global economic outlook.
The Paris-based International Organisation projections offered a sparkle of hope for the global economy with the global GDP forecast to contract by 4.2% in 2020 from its previous projection of 4.5%. This projection is on the back of the development of COVID-19 vaccines that have raised hope across many frontiers.
However, OECD’s 2021 global growth forecast was trimmed from the previous 5.0% to 4.2% due to the current pattern of outbreaks and lockdowns which may likely persist for a while with higher potential risks of lasting damage. Accordingly, OECD projected that global GDP would return to pre-pandemic levels by the end of 2021. The organisation has projected a growth rate of 3.7% for 2022.
Across OECD economies, development is expected to be gradual at 3.3% in 2021 albeit uneven, with China being the sole outlier as it is expected to record strong growth of 1.8% in 2020. China is also projected to account for one-third of world economic growth in 2021 with an 8.0% growth and a projected growth of 4.9% in 2022.
The steaming up of the Chinese economy is a result of policy stimulus, stronger credit growth, and improved export performances. Notwithstanding, the rising corporate debts and shadow banking present financial risks that need to be checked.
Furthermore, the United States is expected to record an output decline of 3.7% in 2020, before perking up in 2021 and 2022 by 3.2% and 3.5% respectively. In the near term, increased unemployment rate (when compared to pre-pandemic levels) and the second wave of the pandemic are likely to slow the pace of recovery until a mass rollout of an effective vaccine in H2:2021 to contain the spread. However, a fiscal package in early 2021 and an accommodative monetary policy should help support consumer spending and boost economic activity.
Also, due to the recent restrictions and lockdown protocols implemented as a result of the second wave of the pandemic, UK’s GDP is set to contract by 11.2% in 2020, after which a rebound of 4.2% and 4.1% is projected for 2021 and 2022 respectively.
This upbeat is posited to be largely driven by increased consumption. More so, in view of Brexit arrangements, a conclusive free trade agreement with the European Union will help promote certainty in exports and imports activities.
OECD’s upward revision of world growth from a contraction of 4.5% to 4.2% in 2020 is in tandem with IMF’s global economic review in October from a projected decline of 4.9% to 4.4%. The impacts of COVID-19 appear to be one that has planted its root dip into the marrows of the global economy.
Nonetheless, with the heightened expectation on the development of effective COVID-19 vaccines, there appears to be hope for the economy of nations to be liberated from the wringing clench of the pandemic. Additionally, there will be a need for the fiscal actors to intensify efforts in providing stimulus support to keep the anticipated trajectory of the recovery.