The global recession this year will not be as deep as expected, the Organisation for Economic Co-operation and Development (OECD) said on Monday, as a result of countries’ efforts to counter the economic fallout from the COVID-19 pandemic.
The OECD released its interim Economic Outlook report on Wednesday which gave a slightly positive tone than the previous edition published in June. The report finds that “economic output recovered swiftly following the easing of measures to contain the COVID-19 pandemic and the initial re-opening of businesses.” However, it also notes that the “pace of recovery has lost momentum over the summer,” adding that restoring confidence will be key to successful economic recovery.
Recovery after initial set-back
OECD projected a contraction of 4.5 per cent in global economic output this year and a return to growth of roughly 5 per cent in 2021-22. In its previous set of forecasts in June, the Paris-based organisation had been expecting the global economy to shrink by 6.0 percent in 2020 and return to growth of 5.2 percent next year.
“After the initial bounce-back in many activities following the easing of confinement measures, there are some signs from high-frequency indicators and business surveys that the pace of the global recovery has lost momentum since June, particularly in advanced economies,” the OECD said.
Range of factors determine future growth prospects
The OECD expects all G20 countries except China to fall into recession this year, with a swift but fragile recovery projected for 2021. The OECD expects global GDP to return to its pre-pandemic level by the third quarter in 2021; however, economic output is expected to remain below late-2019 levels in many countries, not to mention the levels projected before the pandemic hit.
The report also notes that uncertainty remains high and that “prospects for an inclusive, resilient and sustainable economic growth will depend on a range of factors.” These include “the likelihood of new outbreaks of the virus, how well individuals observe health measures and restrictions, consumer and business confidence, and the extent to which government support to maintain jobs and help businesses succeed in boosting demand.