OECD economic outlook shows that economic recovery will continue, but imbalances and risks will worsen

January 12, 2021-

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Global recovery continues, according to the latest OECD economic outlook, but it is losing momentum and creating imbalances. The inability to deploy vaccine campaigns quickly and effectively around the world is costly and the uncertainty remains high as new variants emerge one after another.

In most OECD countries, production is above levels at the end of 2019 and is gradually converging towards the trajectory expected before the pandemic. However, low-income countries, especially those with low COVID-19 vaccination rates, may lag behind.

The economic outlook predicts that global economic growth will recover. This will reach 5.6% this year, 4.5% in 2022, and return to 3.2% in 2023, close to the speed observed before the pandemic.

The strong recovery of activity seen earlier this year has been stalled in many developed countries. Production lines are clogged due to the surge in demand for commodities due to the resumption of the economy and delays in supply. Labor shortages, pandemic-related outages, rising energy and commodity prices, and a shortage of some key materials are all factors that are curbing growth and increasing cost pressure. Inflation has risen sharply in some regions since the start of this recovery phase.

In addition to cost pressures caused by supply turmoil and rising food prices, energy market imbalances are key factors driving inflation in all economies. Gas prices are rising sharply, especially in Europe, risk is high, and storage levels are about 28% lower than normal during this period. Low-income households are inevitably hit hardest by rising food and energy costs.

Inflationary pressures have proven to be stronger and more persistent than expected a few months ago. In the OECD region, consumer price inflation is expected to begin to ease in 2022 as bottlenecks are eased, capacity increases, labor market tensions normalize and demand rebalances. According to the economic outlook, if a new wave of COVID-19 infections further disrupts supply, they could continue inflationary pressures.

Another risk posed by the recent emergence of Omicron variants is poor health, which can lead to new restrictions that can jeopardize recovery. According to the economic outlook, the first public policy must be to ensure better access to vaccines for all. Faster, better-tuned global vaccine momentum is essential not only to save lives and prevent the emergence of new variants, but also end some of the bottlenecks that undermine the strength of recovery. , Production sites, ports, and borders.

If the housing market plummets amid concerns about the financial strength of China’s largest real estate developer, a sharp slowdown in China could occur, hindering global growth. Such slowdowns will spread rapidly to other countries, especially if they bring uncertainty to international financial markets and exacerbate current supply turmoil.

Mathias Cormann, OECD Secretary-General, presented the economic outlook with Mr., OECD Chief Economist.myself Lawrence Boone said: Risks and uncertainties are significant, exacerbating imbalances and threatening recovery, as indicated by the emergence of Omicron variants. Ensuring that recovery is on track will address many imbalances, but above all, better international coordination, improved health care systems, and immunization campaigns in countries around the world. It means managing the health crisis through a large-scale enhancement of. »»

On his side, M.myself Lawrence Boone said: “The government acted swiftly and effectively during the crisis to help citizens and businesses. But work is not done. Inadequate coordination of vaccine adoption puts us all at risk. It is imperative to learn lessons and invest in the future. This will help rethink the health care system, invest in infrastructure, make up for the months children couldn’t go to school, and all. Includes implementing ambitious strategies for integrating people into employment.

She added: “Governments need to rethink how they use public resources. They must correct past mistakes to prepare for the future. Amplify potential growth and move to clean energy. You need to spend more wisely to accelerate. »»

According to the economic outlook, the termination of pandemic-related public support measures should be phased out to avoid sluggish activity. That said, it is imperative to restructure spending to strengthen investment in public infrastructure and leave room for agility to support the serious economic changes inherent in the fight against climate change. It is imperative that budget and financial authorities provide clear guidelines for action strategies aimed at maintaining market confidence and public support.

To read the entire report and get more information, see the OECD Economic Outlook online. Journalists wishing to obtain information should contact the OECD Media Department (tel: +33 (0) 1 45 24 97 00).

The OECD is a global forum that works with more than 100 countries to promote policies aimed at maintaining individual freedom and improving the economic and social well-being of people around the world.

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