OECD lifts economic outlook on stronger-than-expected US, Chinese recoveries
The global economy appears to be recovering from the novel coronavirus slump faster than thought only a few months ago, thanks to improving outlooks for China and the United States, the OECD said on Wednesday.
The world economy is on course to contract 4.5 percent this year, the Organization for Economic Cooperation and Development said, which was up from the 6 percent contraction that it forecast in June.
Provided the virus is kept from spreading out of control, the global economy will bounce back into growth next year by expanding 5 percent, trimmed from a June forecast of 5.2 percent, the Paris-based policy forum said. However, a stronger resurgence of the virus or more strict measures to contain it could chop 2-3 percentage points from the 2021 outlook, the OECD warned.
Having been the first country to experience the outbreak and having moved swiftly to control its spread, China was forecast to be the only country in the G20 group of economic powers to see growth this year with an increase of 1.8 percent, up from a June projection of a contraction of 2.6 percent.
Chinese Premier Li Keqiang on Tuesday said China is set to achieve its main annual targets and register positive GDP growth in 2020. The country’s economy expanded 3.2 percent year on year in the second quarter, bouncing back from a contraction of 6.8 percent in the first quarter.
Meanwhile, the US economy, the world’s biggest, was also forecast to fare better this year than previously feared with a contraction of 3.8 percent, still dire but far better than the -7.3 percent forecast previously.
Germany would perform better than the eurozone as a whole, with its economy set to shrink by 5.4 percent, compared with a contraction of 7.9 percent for the single currency area.
Its brighter overall outlook for this year masked big differences between major economies with the US, China and Europe seen performing better than feared while India, Mexico and South Africa may do worse as they struggle to contain the virus.
The OECD said its forecasts were built on the assumption that local outbreaks would continue and would be targeted with local action rather than nationwide lockdowns. It also assumed a vaccine would not be widely available until late next year.
The OECD said governments and central banks’ actions to support households and companies’ incomes had helped avert worse downturns.