Building confidence will be crucial to ensure that international economies recover amid the pandemic-driven uncertainty, said an Organization for Economic Cooperation and Development (OECD) report released Wednesday.
According to the OECD’s Interim Economic Outlook report, prospects for an inclusive, resilient, and sustainable economic growth will depend on a range of factors, including the likelihood of new outbreaks of the virus.
It will also rely on how well individuals observe health measures and restrictions as well as consumer and business confidence, and the extent to which government support to maintain jobs and help businesses succeeds in boosting demand, it said.
The OECD also projected global GDP will fall 4.5% this year before growing 5% in 2021.
“The forecasts are less negative than those in OECD’s June Economic Outlook, due primarily to better than expected outcomes for China and the United States in the first half of this year and a response by governments on a massive scale,” it said.
However, the OECD added, output in many countries at the end of 2021 will still be below the levels at the end of 2019, and well below what was projected prior to the pandemic.
“If the threat from COVID-19 fades more quickly than expected, improved business and consumer confidence could boost global activity sharply in 2021,” it noted.
But a stronger resurgence of the virus or more stringent lockdowns could cut 2-3 percentage points from global growth in 2021, with even higher unemployment and a prolonged period of weak investment, the OECD said.
Commenting on the report, OECD Chief Economist Laurence Boone said: “It is important that governments avoid the mistake of tightening fiscal policy too quickly, as happened after the last financial crisis.”
She concluded without continued government support, bankruptcies and unemployment could rise faster than warranted and take a toll on people’s livelihoods for years to come.
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