The global economy is doing better than first thought during the coronavirus pandemic, but still is vulnerable to a new outbreak of the virus, an international economic monitoring group sai Wednesday.
The Organization for Economic Cooperation and Development, a Paris-based group of 37 Western countries and their allies, projected that the world’s economy will slip 4.5% this year, an improvement from the 6% drop it predicted in June.
The OECD said the world’s economic fortunes will rebound next year, growing by 5%, but cautioned that the outlook is "subject to considerable uncertainty" as the pandemic remains untamed.
Meanwhile, chief OECD economist Laurence Boone said, “Momentum appears to be plateauing and confidence remains weak.”
The 2021 projection assumes that "sporadic local outbreaks will continue" and that a vaccine will not be widely available until late next year, a year or more later than President Donald Trump is predicting in the United States.
The OECD predicted the U.S. economy will do better this year than originally thought, with the world’s biggest economy contracting 3.8% instead of dropping by 7.3% as first forecast.
But Boone said continued economic improvement in the U.S. is contingent on whether the White House and lawmakers can agree on at least a new $1.5 trillion coronavirus relief package, a deal that so far has proved elusive.
“If there is no follow-up (to $3 trillion in coronavirus aid already approved), then 2021 will take a hit,” Boone said. “We are concerned that if there is no stimulus, people in the most precarious position will suffer most.”
The OECD said No. 2 China is expected to be the only country among the world’s 20 biggest economies to grow this year, advancing by 1.8% instead of falling by 2.6% as previously projected.
But the OECD cut its forecasts for India, Mexico and South Africa.
The OECD advised governments to not raise taxes or cut spending next year "to preserve confidence and limit uncertainty."
It said, “The aim must be to avoid premature budgetary tightening at a time when economies are still fragile.”