OECD revises forecast for world growth – low this year and high for 2022

The Organisation for Economic Co-operation and Development (OECD) has slightly lowered world economic growth for this year, now pointing to 5.7% and improving forecasts for 2022, with an estimate of 4.5%.

According to a report with the economic outlook (‘Economic Outlook’), published today, the OECD justifies these numbers with a “strong recovery in Europe, the high probability of budget support in the US next year and less savings for households, which will improve growth prospects in advanced economies”.

In May, the OECD had improved, compared to December 2020, the forecasts for the world economy, estimating a growth of 5.8% in 2021 and 4.4% in 2022.

“GDP [Gross Domestic Product] has now surpassed the pre-pandemic level, but there are still differences between countries”, namely with regard to employment, “particularly in emerging markets and developing economies, with low vaccination rates” , reads the document released today.

According to the organisation, the economic impact of the Delta variant of the Covid-19 virus “has been relatively mild in countries with high vaccination rates, but it has reduced momentum elsewhere and put more pressure on global supply chains and costs”.

The OECD also reported increases in inflation in the US, Canada, UK and other markets, “but it remains relatively low in many other advanced economies, particularly in Europe and Asia”.

According to the organisation, the increase in the prices of goods and the global costs of maritime transport are the main responsible for the increase in inflation in the last year. 

“There remains significant uncertainty,” noted the OECD, warning that “an increase in the pace of vaccination or an accelerated reduction in household savings could increase demand and reduce unemployment, but also boost inflationary pressures.” On the other hand, a reduced pace of vaccine distribution and the appearance of new virus mutations “could result in a weaker recovery and a greater loss of jobs”.

The OECD stressed that governments “must ensure that all necessary resources are being used to secure vaccination as quickly as possible around the world, to save lives, preserve incomes and control the virus”, calling for a greater international effort. in aid to the least developed countries.

“The support of macroeconomic policies remains necessary, taking into account that the short-term perspectives remain uncertain and the labor markets have not recovered, with measures that depend on the economic evolution of each country”, states the organisation, in the document published today.

In addition, the OECD calls for fiscal measures to remain flexible, warning of the consequences of an “abrupt and premature” withdrawal.