LONDON — The Organization for Economic Cooperation and Development (OECD) expects the global economy to build momentum over the coming two years, with real gross domestic product (GDP) growth projected to reach pre-pandemic levels by the end of 2021.
"For the first time since the pandemic began, there is now hope for a brighter future," the OECD said Tuesday, citing progress with coronavirus vaccines and unprecedented government and global bank action to mitigate the economic impact of the crisis.
"The worst has been avoided, most of the economic fabric has been preserved and could revive quickly, but the situation remains precarious for many vulnerable people, firms and countries."
In its latest economic outlook, the OECD said it expects the global economy to contract 4.2% this year. That reflects an upward revision from an estimate made in September that pointed to a 4.5% fall in real GDP.
Looking ahead, the group said worldwide economic growth would average 4% over the next two years. It expects real GDP growth to hit 4.2% in 2021 — trimmed from a September forecast of 5% — and 3.7% in 2022.
It warned "considerable" uncertainty remains, however, and urged policymakers around the world to maintain targeted support to vulnerable children, people and businesses to reduce the risk of the coronavirus crisis "leaving scars."
The OECD, which monitors and advises its 37 member countries on economic policy, expressed cautious optimism about the worldwide economy gaining momentum through to 2022.
It cited scientific progress, pharmaceutical advances, and adjustments in the behavior of people and firms, among others, as factors likely to help keep the virus in check, allowing strict restrictions on mobility to be lifted progressively.
Together with reduced uncertainty and the exceptional fiscal relief provided throughout 2020, which the OECD expects to "pay off handsomely," the global economic rebound is anticipated to keep getting stronger as more and more activities re-open.
Several encouraging developments in the race to deliver a safe and effective coronavirus vaccine have been announced in recent weeks, raising hopes the world could soon return to some semblance of normality.
It is hoped coronavirus vaccines will help to bring an end to the pandemic that has wiped out a chunk of the global economy and claimed more than 1.46 million lives worldwide.
The OECD said the economic recovery would be uneven across countries, however, "potentially leading to lasting changes in the world economy."
It said China was expected to account for over one-third of world economic growth in 2021, while the contribution of Europe and North America "will remain smaller than their weight in the world economy."
The OECD said it sees China, which started recovering earlier than its peers, recording economic growth of 1.8% this year. It remains the only major economy expected to record economic growth in 2020.
The world's second-largest economy was projected to record real GDP growth of 8% next year and 4.9% in 2022.
By comparison, the U.S. was expected to record an economic contraction of 3.7% in 2020, before posting growth of 3.2% in 2021 and 3.5% in 2022.
The euro area was seen reporting real GDP of -7.5% this year, 3.6% in 2021 and 3.3% in 2022.
"Despite the huge policy band-aid, and even in an upside scenario, the pandemic will have damaged the socio-economic fabric of countries worldwide," the OECD said in its report.
"People living in poverty and usually less well covered by social safety nets have seen their situation deteriorate even further. Children and youth from less well-off backgrounds, and less qualified adult workers have struggled to learn and work from home, with potentially long lasting damage."
The OECD said governments would need to use their policy instruments to actively ensure those hit hardest by the coronavirus crisis receive the support they need.