OECD moderates 2020-21 economic forecasts

The OECD today again moderated its forecast for global economic contraction this year, but said that the rate of growth next year will be slower than it previously projected.

It also said that any roll-out of Covid-19 vaccines will have only a gradual effect on growth momentum, echoing the IEA's recent forecast that even a successful immunisation jab will not boost oil demand by any notable measure until well into next year.

In its Economic Outlook , published today, the OECD said that world gross domestic product (GDP) will fall by 4.2pc this year and then rise by the same amount in 2021. In September it said that this year's contraction would be 4.5pc, and 2021 expansion would be by 5pc. The forecasts are broadly in line with those made by the IMF last month .

Today the OECD warned of an uneven recovery and said that even by the end of next year, many economies will have shrunk from the levels seen before the pandemic, including the eurozone, Brazil, Japan and the UK.

It again forecasts that only China's economy will grow this year, by 1.8pc. It said this will be followed by 8pc growth next year. Some major oil-consuming countries see a big fall in projected GDP this year — by 9.9pc in India, 3.7pc in the US and 5.4pc in Canada. All economies return to growth next year, the OECD said, with the US at 3.2pc, the eurozone at 3.6pc, India at 7.9pc and Canada at 3.5pc.

But it described the situation at precarious.

"The release of pent-up demand and accumulated savings may reinforce a rebound if vaccines become available faster and more widely, boosting global growth to around 5pc in 2021," it said. "But confidence may be hit if problems arise with the distribution or unexpected secondary effects of the vaccines and if the lessons from the first two waves of the pandemic are not learnt. In this scenario, global growth in 2021 would be lowered by 2.75 percentage points."

The OECD also said that corporate debt is reaching levels last seen in the global financial crisis a decade ago, raising the risk of insolvencies and cutting firms' capacity to invest, which would weaken a broader economic recovery.

By Ben Winkley

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