The Organisation for Economic Cooperation and Development has raised its 2021 global growth forecast to 5.6%, which is 1.4 percentage points higher than estimated in December.
Activity has picked up in many sectors of the economy and the rollout of vaccines, while still uneven, is gaining momentum, the organisation concluded in its latest interim economic outlook.
The huge fiscal stimulus in the US, meanwhile, is likely to provide a major boost to the economy. The OECD estimates that the US stimulus package is going to add one percentage point to global growth.
But vaccines have to be deployed faster to achieve a global economic recovery, as the performance across countries is still uneven and the pandemic is increasing social inequalities.
Lockdown measures are particularly affecting vulnerable groups and risk long-term damage to job prospects and living standards for many people.
The interim economic outlook therefore calls for ramping up vaccinations; for swifter, more targeted fiscal stimulus to foster output and confidence; and for maintaining income support for people and businesses hard hit by the pandemic, while preparing the ground for a sustainable recovery.
“Speed is of the essence,” said OECD Secretary-General Angel Gurría. “There is no room for complacency. Vaccines must be deployed faster and globally. This will require better international co-operation and co-ordination than we have seen up to now. It is only by doing so that we can focus our attention on building forward better and laying the foundations for a prosperous and lasting recovery for all.”
The OECD estimates that world output is expected to reach pre-pandemic levels by mid-2021 but the pace and duration of the recovery will depend on the race between vaccines and emerging variants of the virus.
This news comes after the head of Swiss-German logistics group Kuehne+Nagel warned in the Financial Times that half of all adults in wealthy countries will still be waiting for their first jab 15 months from now. People in the developing world would have to wait a year longer.
Detlef Trefzger, CEO of the world’s largest haulage group, which has been contracted to deploy the vaccines, said manufacturing capacity, not distribution, was the main limiting factor.
“I would not expect it to be realistic that more than 30-50 per cent of people [would be] vaccinated in the western world before summer next year,” Trefzger said.
OECD chief economist Laurence Boone said on Tuesday that vaccination programmes and stimulus measures should work hand-in-hand.
“Widespread vaccination of the adult population is the best economic policy available today to get our economies and employment growing again,” she said. “If we are at war with the virus then we need to put vaccine production on a war footing, provide the necessary resources and speed up deployment across the world.”
She said, “If we don’t get enough people vaccinated quickly enough to allow restrictions to be lifted, the recovery will be slower and we will undermine the benefits of fiscal stimulus.”
In the OECD’s central scenario, US growth is projected to be 6.5% in 2021, an upward revision of more than three percentage points since December, partly reflecting the large-scale fiscal stimulus now planned with a sustained pace of vaccination.
This also helps to lift output around the world. In the euro area, where the level of fiscal stimulus is lower and vaccine rollout slower, the interim economic outlook sees GDP rising 3.9%, a 0.3 percentage point upward revision.
In Asia Pacific, where several countries have effectively contained the virus, industrial activity has regained dynamism. In China, GDP growth is projected to be 7.8% this year; in Japan, 2.7%; in Korea, 3.3%; and in Australia, 4.5%.
But the recovery is likely to be more moderate in the emerging market economies of Latin America and Africa amid a resurgence of the virus, slow vaccine deployment and limited scope for additional policy support, the OECD outlook noted.