By Eurasia Business News – December 2, 2020

The OECD expects the global economy to expand 4.2 per cent in 2021 – Photo credit : pexels.

The Organization for Cooperation and Economic Development (OECD) has revised its outlook on the global economy, predicting a 4.2 per cent contraction this year.

However, the organization forecasts a rebound in the global economic growth for 2021, amid announcements of effective vaccines against Covid-19. The latest news on the vaccine front sparks optimism. US, European and Russia laboratories hope to start distributing their vaccines by the end of December.

Progress with vaccines and treatment has lifted expectations and uncertainty has receded. Thanks to unprecedented government and central bank action, global activity has rapidly recovered in many sectors, though some service activities remain impaired by physical distancing.

Most firms have survived, albeit financially weakened in many cases. Without massive policy support, the economic and social situation would have been calamitous.

The OECD expects the global economy to expand 4.2 per cent in 2021, down from an earlier forecast of 5 per cent, as lockdowns and a rise in coronavirus cases across the globe crimp growth. It forecasts the global economy to grow 3.7 per cent in 2022. OECD analysts report that scientific progress, pharmaceutical advances, more effective tracing and isolation, and adjustments in the behaviour of people and firms will help keep the virus in check, allowing restrictions on mobility to be lifted progressively.

But this recovery remains sluggish in the short term because of the restrictive measures put in place in several countries and the logistical challenges to be met before the large-scale distribution of vaccines worldwide. According to the OECD, people would have to live with the virus for another 6 to 9 months.

The contribution of Europe and North America to global growth will remain smaller than their weight in the world economy.

The situation will be especially complicated for young people, hit by massive unemployment and for millions of small and medium businesses, according to the OECD analysts.

Small and medium-sized enterprises are in fact heavily indebted because of the health crisis and have been impacted by the lockdowns in Europe. They risk cascading bankruptcies. Consequently, the Paris-based organization calls on governments to continue or even expand the emergency aid plans put in place to support the economy and companies. Policies to support jobs and firms, in place since the beginning of the pandemic, will enable a faster rebound when restrictions are lifted.

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