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OECD Predicts Faster Growth for 2021

Even if it is taking far too long for many people to receive it, the vaccination campaigns that have started around the world are already having a positive impact.

In its outlook for the global economy presented on Tuesday, the industrialized nation’s organization OECD expects that it will reach the level before the corona pandemic outbreak by the middle of the year. Specifically, global gross domestic product is expected to grow by 5.6 percent in 2021 – driven primarily by the USA and China. Growth of 3.9 percent is forecast for the euro zone,

Global economic output will rise above the pre-pandemic level in mid-2021,” said OECD chief economist Laurence Boone when presenting the forecast. The OECD is thus much more optimistic than it was in December: at that time it had only predicted an increase of 4.2 percent. The forecast has also been raised for 2022: from 3.7 to 4.0 percent. Last year there was still a slump of 3.4 percent.

“The global economic outlook has improved significantly in recent months, aided by the gradual adoption of effective vaccines,” said Boone. However, in this regard, the vaccination rate must be increased further, urges OECD Secretary General Angel Gurría. “We need to vaccinate faster worldwide. And for that we need better international coordination. “

The OECD figures also show the differences in vaccination rates in the individual member states. While more than half of the population in Israel has already been immunized against the Covid virus, this value is below ten percent in most other countries. Naturally, things look even worse in many emerging and developing countries. The pandemic will therefore widen the economic gap between countries, according to the OECD.

The second reason for the generally more optimistic forecast is the state corona aid packages in many countries. In addition, many economies are coping better with the measures taken to contain the virus. Nevertheless, Chief Economist Boone warned that the pandemic would have economic consequences for a long time to come: “Despite the improved global outlook, production and income in many countries will remain below the level expected before the pandemic at the end of 2022.”

For the individual countries, the OECD has raised its forecast for the USA particularly sharply: This year growth of 6.5 percent is expected there, compared to 3.2 percent previously assumed. The increase was justified with the vaccination progress and new state aid. US President Joe Biden wants to get the economy going again with a $ 1.9 trillion (1.6 trillion euros) package. For China, the OECD expects an increase of 7.8 percent this year, which is slightly less than the 8.0 percent predicted in December. For Germany, the OECD raised its forecasts slightly. Europe’s largest economy is expected to grow by 3.0 (previously: 2.8) percent this year.

However, there are still major risks, warns the industrialized countries organization. If the global vaccination campaign progressed more slowly and new virus mutations emerged that are resistant to existing vaccines, this would again lead to significantly less growth, higher job losses, and more company bankruptcies.
Karl Cowan is Editor-in-Chief of Praktikal Media Group and a journalist and commentator of 20 years on business, technology, and the economy.  LinkedIn: Karl Cowan