Daily Management Review

OECD Says Pandemic Induced Global Recession Not To Be As Severe As Expected


OECD Says Pandemic Induced Global Recession Not To Be As Severe As Expected
The efforts of various countries to counter the economic impact of the novel coronavirus pandemic will potentially result in the global recession that the global economy is currently undergoing will not be as deep as expected, said the Paris based think tank  - the Organisation for Economic Co-operation and Development (OECD).
The OECD however also said that the recovery of the global economy next year will also be slower and less robust than expected. The organization predicted that this year, there will be a contraction of 4.5 per cent in global economic output while it will return to a growth of about 5.0 per cent next year.
In a forecast of the global economy made by it June, the Paris-based OECD had said that it expected the global economy to contract by 6.0 per cent in the current year while the recovery for the next year will be at about 5.2 per cent. 
"After the initial bounce-back in many activities following the easing of confinement measures, there are some signs from high-frequency indicators and business surveys that the pace of the global recovery has lost momentum since June, particularly in many advanced economies," the OECD said.
The OECD also however pointed out that "the economic outlook remains exceptionally uncertain, with the Covid-19 pandemic continuing to exert a substantial toll on economies and societies".
The OECD said that there was a contraction of 10 per cent year on year in global output in the second quarter of 2020 which was "an unprecedented sudden shock in modern times".
While major economies experienced the extent and timing of the pandemic shock differently, all of the major economies went through a sharp contraction in activity as various governments were forced to implement containment and restriction measures in order to prevent the spread of the pandemic. 
There was a decline of more than 15 per cent in global trade  in the first half of 2020 with the result of severe disruption in the labour markets because of reduced working hours, loss of jobs and forced shut downs factories and businesses.
"Without the prompt and effective policy support introduced in all economies to cushion the impact of the shock on household incomes and companies, the contraction in output and employment would have been substantially larger," the OECD said.
The only economy that is expected to make a growth in 2020 is China with an estimated growth of 1.8 per cent.
In contrast, the Indian economy is expected to shrink by 10.2 per cent for the current year.
The largest economy of the world, the United States, is expected to do better than the global average and is anticipated to report a contraction of just about 3.8 per cent for 2020.
Within Europe, the OECD expects the German economy to do better than the rest of the eurozone with a contraction of its economy by 5.4 per cent while the economic bloc is expected to contract by 7.9 per cent on an average.