Despite The Hopes of Vaccines: The Global Economy is Facing A Severe Winter
The promise that vaccines carry to Corona encourages hope that the economic downturn that came with the plague will end – but before that, the global economy has to deal with a long and difficult winter.
Various restrictions imposed by governments and consumers’ fear of infection will continue to cast a shadow over the global economy deep into the next year, even as vaccine development offers hope of ending the epidemic, the Organization for Economic Co-operation and Development (OECD) said this week.
When the world economy does recover, China will emerge the big winner, the OECD said, and will be responsible for up to a third of the recovery, while Western economies will slowly shake off setbacks that set new negative highs.
The OECD has released new forecasts since several drug companies announced that their vaccines had been tested in clinical trials and found to be effective. Forecasts state that governments must continue to support their economies to ensure a rapid return to activity levels as they were before the plague.
“It’s not like we’ll get vaccinated and within a month everything will be back to normal,” said Lawrence Boone, the OECD’s chief economist.
The organization has slashed its profit forecasts for most of the leading economies, noting an increase in recent infections in the northern hemisphere that has led to new restrictions on households and businesses and prudent consumer behavior.
The organization now predicts that the global economy will grow by 4.21% in 2021, after contracting at the same rate this year. In September, when the OECD released its quarterly forecasts, it expected 5% growth next year.
The OECD cut its growth forecasts for 2021 – 3.2% in the US (previously forecast growth of 4%) and 3.6% in Europe, from 5.1%. It left China’s growth forecast as before, 8%.
The predictions are based on what Boone has defined as a “careful” look at the logistics of vaccine production and distribution, as well as the level of immunization in populations that may be skeptical about its safety.
The OECD expects most economies to operate under some restrictions by the end of 2021.
“For most of next year, we will have to rely on non-drug interventions in order to continue living,” Boone said.
In the U.S., manufacturing companies continued to report growth in November, according to surveys among purchasing executives released Tuesday. The trend continues for seven consecutive months of growth after the epidemic began to shrink.
The Institute for Supply Management’s manufacturing index fell in November to 57.5 from 59.3 points in October. A separate manufacturing survey conducted by IHS Markit gave the U.S. 56.7 points in November, up from 53.4 points a month earlier.
Indices of over 50 points mean that production activity expands, and a result of less than 50 points means that production is small.
“There is some concern in this report about future demand,” said Tim Fiora, who oversees the ISM survey of acquisitions on behalf of factories and demand managers.
The global recovery rate will continue to be uneven
The OECD said the global recovery rate would continue to be uneven between countries. In the last quarter of 2021, China’s economic output is expected to be 9.7% higher than it was in the last three months of 2019. In contrast, Argentina’s economic output is expected to be 8% lower.
The US economic product is expected to recover to levels as before the plague so far, but the national product of European countries is expected to be 3% lower, and that of the UK is 6.4% lower than the product of the last quarter of 2019.
China is expected to account for about a third of global GDP growth next year. Boone said the plague appeared to have accelerated China’s rise as an economic power.
“There is a redistribution of power in the world economy,” she said.
The OECD said the global forecast remained unclear. More effective distribution and use of the vaccine may increase global growth to 5% in 2021 and 5.5% in 2022, while delays in vaccination could delay growth by 1.45% next year and 2.2% in 2021.
The organization, which is based in Paris, provides its member states with policy advice. The United States is a member of the OECD. The organization has called on governments to continue to support the most needy households and businesses and provide broad-based incentives to increase market demand and accelerate recovery.
Boone said OECD forecasts are based on the assumption that there will be new incentives in both the US and Europe, adding that if no incentives are given, it will hurt consumer confidence.
“It will be comforting for businesses and households to know that we have learned something from the recent crisis,” she said.
Despite The Hopes of Vaccines: The Global Economy is Facing A Severe Winter - /10