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OECD Economic Outlook, May 2021
NO ORDINARY RECOVERY
NAVIGATING THE TRANSITION
Global prospects are improving but performance diverges strongly across countries
Prospects for the world economy have brightened but this is no ordinary recovery. It is likely to remain uneven and dependent on the effectiveness of vaccination programmes and public health policies. Some countries are recovering much faster than others. Korea and the United States are reaching pre-pandemic per capita income levels after about 18 months. Much of Europe is expected to take nearly 3 years to recover. In Mexico and South Africa, it could take between 3 and 5 years.
Economic growth projections have been revised upwards
Global economic growth is now expected to be 5.8% this year, a sharp upwards revision from the December 2020 Economic Outlook projection of 4.2% for 2021. The vaccines rollout in many of the advanced economies has been driving the improvement, as has the massive fiscal stimulus by the United States. World GDP growth is expected to be 4.4% next year but global income will still be some USD 3 trillion less by end 2022 than was expected before the crisis hit. USD 3 trillion is about the size of the entire French economy.
More jabs, more jobs
Countries that have been quick to vaccinate their population against COVID-19 and that are managing to control infections through effective public health strategies are seeing their economies recover more quickly. Job vacancy postings in the United States are picking up, including in sectors such as tourism. But while vaccination rates are progressing well in many advanced economies, poorer and emerging-market countries are being left behind. Unless everyone is protected, no one is protected.
Trade pick-up adding to an uneven recovery
Differences in the strength of economic recovery across countries are being driven by the extent of government support to vulnerable workers and businesses, by a country’s dependency on particular sectors such as tourism (Rebuilding tourism for the future), as well as by public health and vaccination policies. Trade is also playing a role. Consumers have been spending less on services and more on goods since the pandemic began. The pick-up in merchandise trade has benefitted countries heavily involved in supply chains, particularly pharmaceuticals, medical supplies and IT material.
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What can governments do?
The pandemic risks causing long-term damage to job prospects and living standards for many people. Governments should use all resources necessary to speed up vaccination throughout the world. They should maintain targeted income support for people and firms until economies can fully reopen and invest in digital and green transformation.
Two minute view
Progress in vaccination in advanced countries and massive government support for people and companies are boosting prospects for the global economy.
Key resources
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OECD Economic Outlook
(Number 109)
The COVID-19 pandemic continues to cast a long shadow over the world’s economies. The OECD Economic Outlook, Volume 2021 Issue 1, highlights the improved prospects for the global economy due to vaccinations and stronger policy support, but also points to uneven progress across countries and key risks and challenges in maintaining and strengthening the recovery.
