OECD hikes global economic growth forecast

The OECD sharply raised its 2021 global growth forecast on Tuesday as the deployment of vaccines and a huge US stimulus program have greatly improved economic prospects.

The Paris-based Organization for Economic Cooperation and Development says it now expects the global economy to grow by 5.6 percent, an increase of 1.4 percentage points from its December forecast and expand 4.0 percent next year.

That marked a sharp increase from its last outlook in early December, when the policy forum forecast global growth of 4.2 percent this year and 3.7 percent next year.

“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus,” it said in a report.

The world recovery will be largely carried by the United States, thanks to President Joe Biden’s US$1.9-trillion stimulus plan, Laurence Boone, chief economist of the OECD, said.

The US economy would grow 6.5 percent this year and 4.0 percent next year, the OECD said, ramping up its forecasts from expectations in December for 3.2 percent in 2021 and 3.5 percent in 2022.

The OECD estimated the package, which includes US$400 billion in one-time payments of US$1,400 to many Americans, would boost US output by around 3 to 4 percent on average in its first full year.

Boone said the US recovery accounts for 1 percentage point of the global growth revision.

The OECD said global output could rise above the pre-pandemic level in mid-2021.

It noted, however, increasing signs of divergence between countries as some nations are faster to roll out vaccines while others employ containment measures.

“Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022,” said the 37-nation organization which advises advanced economies.

For the moment, only China, India and Turkey have surpassed pre-pandemic levels of economic output.

The OECD said the “top policy priority” is to deploy vaccines as quickly as possible throughout the world, to save lives as well as to speed economic recovery.

“There are huge and significant risks to our economic projections, notably the pace of vaccination,” Boone said.

“What we know is that the faster countries vaccinate, the quicker they can reopen their economy,” she said, adding that Europe should speed up its vaccination efforts.

Britain, which also has rolled out vaccines quickly, got a 0.9 percentage point increase to 5.1 percent — higher than the United Kingdom’s own forecast, which was lowered last week.

The eurozone, where vaccination campaigns have been slower, received only a 0.3 percentage point bump to 3.9 percent, as the recoveries in both Italy and France were revised lower.

The forecast for China was also revised lower, by 0.2 percentage points, to 7.8 percent. China aims to expand its economy by more than 6 percent in 2021, according to a Chinese government work report.

The OECD said fiscal and monetary policy should remain supportive of recoveries.