You are here: Home » International » News » Economy
Business Standard

OECD cuts global GDP forecast amid Covid-19 variant concerns

Global growth is set to hit 5.6% this year before moderating to 4.5% in 2022 and 3.2% in 2023, the Organisation for Economic Cooperation and Development said

OECD | GDP | GDP forecast

Reuters & Bloomberg  |  Paris 

Photo: Bloomberg
Photo: Bloomberg

The main risk to an otherwise upbeat global economic outlook is that the current inflation spike proves longer and rises further than currently expected, the said on Wednesday.

Global growth is set to hit 5.6% this year before moderating to 4.5% in 2022 and 3.2% in 2023, the Organisation for Economic Cooperation and Development said in its latest economic outlook.

That was little changed from a previous forecast of 5.7% for 2021, while the forecast for 2022 was unchanged. The did not produce estimates for 2023 until now.

With the global rebounding strongly, companies are struggling to meet a post-pandemic snap-back in customer demand, causing inflation to shoot up worldwide as bottlenecks have emerged in global supply chains.

Like most policymakers, the said that the spike was expected to be transitory and fade as demand and production returned to normal.

"The main risk, however, is that inflation continues to surprise on the upside, forcing the major central banks to tighten monetary policy earlier and to a greater extent than projected," the OECD said.


Provided that that risk did not materialise, inflation in the OECD as a whole was likely close to peaking at nearly 5% and would gradually pull back to about 3% by 2023, the Paris-based organisation said.

Against that backdrop, the best thing central banks can do for now is wait for supply tensions to ease and signal they will act if necessary, the OECD said.

Federal Reserve Chair Jerome Powell said on Tuesday that the U.S. central bank should consider winding down of its large-scale bond purchases faster amid a strong and expectations that a surge in inflation will persist into the middle of next year.

In the United States, the OECD forecast the world's biggest would grow 5.6% this year, 3.7% in 2022 and 2.4% in 2023, down from previous projections of 6.0% in 2021 and 3.9% in 2022.

The outlook for China was also less optimistic, with growth forecast at 8.1% in 2021 and 5.1% in both 2022 and 2023 whereas previously the OECD had expected 8.5% in 2021 and 5.8% in 2022.

However, the outlook was slightly more upbeat for the European zone than previously expected with growth expected at 5.2% in 2021, 4.3% in 2022 and 2.5% in 2023 compared with previous forecasts of 5.3% in 2021 and 4.6% 2022. It wouldn’t be too bad for Europe.

50-bn to vaccinate the world:

It could cost as little as $50 billion to save the global economy.

That’s the amount needed to vaccinate the world, a measure that’s key to ending the pandemic and tackling the imbalances “plaguing the recovery,” according to OECD Chief Economist Laurence Boone.

“When you balance things out, $10 trillion for supporting the economy going through the pandemic compared with a tiny $50 billion to bring the vaccine to the entire world population, that looks completely disproportionate,” she told Bloomberg Television in an interview Wednesday. The first number is the amount spent by Group of 20 countries to mitigating the economic impact of Covid-19.

The emergence of omicron increases the uncertainty already weighing on the global economic outlook and highlights vaccination shortcomings, she said. While the Paris-based organization didn’t directly account for that strain in its new forecasts, it emphasized continued pandemic risks and urged governments to address low inoculation rates in some regions so as not to create “breeding grounds for deadlier strains.”

On top of tighter virus restrictions including renewed lockdowns in some parts, OECD members are battling soaring inflation and hold-ups in global supply chains that are starving factories of components.

Meanwhile, Britain is headed for the fastest growth in the Group of Seven major economies this year and next but will suffer a setback if supply shortages are allowed to worsen, the OECD said.

A lack of workers to fill open jobs and persistent disruptions in the flow of goods across borders could force companies to reduce output, damaging the pace of recovery in the economy, the Paris-based researcher concluded in a report on Wednesday.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, December 02 2021. 00:19 IST