Global economy is set to grow at a faster pace this year than projected earlier due to accelerated roll-out of vaccination against the coronavirus and a better outlook for the U.S. on the back of a huge stimulus boost, the Organization for Economic Co-operation and Development said Tuesday.
The Paris-based think tank raised the global GDP growth forecast for this year to 5.6 percent from 4.2 percent seen in December in its latest Interim Economic Outlook report.
The global economy is projected to expand 4.0 percent in 2022, which is faster than the 3.7 percent forecast in December.
“Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022,” the OECD warned.
World output is expected to reach pre-pandemic levels by mid-2021 but the pace and duration of the recovery will depend on the race between vaccines and emerging variants of the virus, the OECD said.
“Speed is of the essence,” OECD Secretary-General Angel Gurr?a said.
“If we don’t get enough people vaccinated quickly enough to allow restrictions to be lifted, the recovery will be slower and we will undermine the benefits of fiscal stimulus,” OECD Chief Economist Laurence Boone said.
The OECD raised the US growth projection to 6.5 percent from 3.2 percent seen in December. The upward revision partly reflects the large fiscal stimulus planned with a sustained pace of vaccination, the group said. The US growth projection for next year was raised to 4.0 percent.
Eurozone growth forecast for this year was also upgraded to 3.9 percent from 3.6 percent. The vaccination is slower and stimulus is lower in the single currency bloc, the think tank noted.
Among the big four, projections were lowered for France and Italy.
China’s GDP growth projection for this year was lowered to 7.8 percent from 8.0 percent.
The biggest upgrade of the growth projection for this year was for India. The country’s growth outlook was boosted to 12.6 percent, the fastest among OECD members, from 7.9 percent.
Regarding the monetary policy, OECD said the current very accommodative stance should be maintained. Policymakers should allow temporary overshooting of headline inflation provided underlying price pressures remain well contained, with macroprudential policies deployed where necessary to ensure financial stability, the group added.