The Organization for Economic Cooperation and Development (OECD) has revised its outlook for 2020, predicting a smaller recession of the global economy and slightly greater potential for growth.
According to the OECD’s Economic Outlook interim report for September 2020, risks and uncertainty are still high due to the coronavirus (Covid-19) pandemic.
OECD analysts note that restoring confidence will be crucial to how successfully economies can recover.
According to the report, global GDP is expected to decline by 4.5 percent this year and grow in 2021 by 5 percent compared to a decrease of 6 percent and an increase of 5.2 percent forecast in June.
Provided the coronavirus crisis subsides faster than expected, boosting confidence could enhance global activity in 2021, said OECD analysts.
At the same time, a second wave of the virus and stricter restrictive measures could hinder global growth by 2-3 percentage points in 2021, leading to higher unemployment and a prolonged period of weak investment.
With regard to the eurozone economy, the OECD is predicting a smaller recession for 2020 at 7.9 percent compared to 9.1 percent forecast in June, trimming its growth projection for 2021 to 5.1 percent against 6.5 percent. Based on these estimates, return to pre-Covid-19 growth rates are not to be expected before 2022 – in line with European Commission and European Central Bank predictions.
In terms of losses in the eurozone, the German economy is expected to record the smallest losses set to contract by 5.4 percent this year compared to 6.6 percent recession forecast in June, and to grow by 4.6 percent in 2021 against 5.8 percent previously predicted.
The Italian and French economies are projected to shrink by 10.5 percent and 9.5 percent, respectively, and to grow by 5.4 percent and 5.8 percent next year.
According to the report, the same will apply to most G20 economies.
“In most economies, the level of production at the end of 2021 is projected to remain below the level it was at the end of 2019 and significantly lower than forecasts before the pandemic,” the report said.
The OECD is basing its outlook on the assumption that Covid-19 outbreaks will continue, as will targeted measures and that population vaccination will not be widely available before 2021.
In this direction, OECD analysts underline that “fiscal and monetary support measures must be retained in order to maintain confidence and limit uncertainty, but should evolve in line with ongoing economic conditions”.