OECD Ups Global Growth Forecast For Next Year, Lowers 2021 Outlook
The Organisation for Economic Cooperation and Development raised the growth projection for next year, while lowering the same for this year, and expressed concern over the increasingly uneven nature of the economic recovery from the slump caused by the pandemic as well as rising inflationary pressures.
Global growth projection for next year is now 4.5 percent versus 4.4 percent forecast in May, the Paris-based think tank said in an interim report released Tuesday.
The projection for this year was trimmed to 5.7 percent from 5.8 percent predicted in May.
“The economic impact of the Delta variant has so far been relatively mild in countries with high vaccination rates, but has lowered near-term momentum elsewhere and added to pressures on global supply chains and costs,” OECD said.
“Policies have been efficient in buffering the shock and ensuring a strong recovery; planning for more efficient public finances, shifted towards investment in physical and human capital is necessary and will help monetary policy to normalise smoothly once the recovery is firmly established,” OECD Chief Economist Laurence Boone said.
The uneveness of the recovery from the slump caused by the Covid-19 pandemic is exacerbated by the large differences in vaccination rates between countries.
The OECD said that renewed outbreaks of the coronavirus are forcing some countries to restrict activities, thus causing bottlenecks and supply shortages again.
The think tank pointed out a marked variation in the outlook for inflation. Inflationary pressures have risen sharply in the US and some emerging market economies, but remains relatively low in many other advanced economies, particularly in the euro area, the report said.
Reopening of economies has led to strong demand that has boosted prices for commodities such as oil and metals as well as food, which has a stronger effect on inflation in emerging markets, OECD said.
Supply chain disruptions and higher shipping costs drive prices higher.
That said, OECD expects inflation to slow next year to around 3.5 percent after peaking at 4.5 percent at the end of this year.
“Supply pressures should fade gradually, wage growth remains moderate and inflation expectations are still anchored, but near-term risks are on the upside,” the report said.
The growth projection for the United States for this year was cut sharply to 6.0 percent from 6.9 percent. The outlook for next year was raised to 3.9 percent from 3.0 percent.
Eurozone growth forecast for this year was raised to 5.3 percent from 4.3 percent. The outlook for 2022 was lifted to 4.6 percent from 4.4 percent.
Germany’s growth projection for this year was lowered to 2.9 percent and the forecast for next year was raised to 4.6 percent. France and Spain had their projections for both years raised.
Italy’s outlook for this year received a strong upgrade to 5.9 percent, while the projection for next year was lowered to 4.1 percent.
The UK growth forecasts for this year and next were lowered to 6.7 percent and 5.2 percent, respectively.
India’s growth projection for this year and next were cut to 9.7 percent and 7.9 percent, while China’s growth forecasts were left unchanged at 8.5 percent and 5.8 percent.
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