Daily Management Review

Vaccine Rollouts And US Fiscal Stimulus Prompts OECD Raise Global Growth Forecasts


Vaccine Rollouts And US Fiscal Stimulus Prompts OECD Raise Global Growth Forecasts
According to the Organisation for Economic Cooperation and Development (OECD), the United States putting in trillions of dollars into the largest economy of the world and the Covid-19 vaccines rollouts throughout the world allowing businesses to resume operations has improved the global economic outlook as the organization pushed up its forecast higher.
The OECD said that the global economy is expected to grow 5.8 per cent for the current year and 4.4 per cent % next year. The previous estimates of the OECD of the global growth as released by it in March had pegged the numbers ay 5.6 per cent and 4.0 per cent respectively for 2021 and 2022.
The OECD said in its latest Economic Outlook publication that the business activity of the global economy has now returned to pre-pandemic levels. It however cautioned that the global economy was yet to achieve the growth expected prior to the global health crisis.
"The world economy is currently navigating towards the recovery, with lots of frictions," OECD chief economist Laurence Boone said in an editorial to the Outlook. "The risk that sufficient post-pandemic growth is not achieved or widely shared is elevated," she added.
The OECD however noted that many of the emerging market economies were slow in implementing vaccination deployment which prevented them from opening up their economies and were expecting fresh Covid-19 outbreaks even while the advanced economies were being able to gradually reopen for business because of the fast pace of their vaccination campaigns.
The central banks of the advanced economies should hold on to the relaxed financial conditions in their countries while also tolerating inflation going past their targets, the OECD said.
It said that there will likely not be sustained inflation because of the sizeable spare capacity in the global economy even though there has been supply chain bottlenecks that have triggered price pressures in recent months with reopening up of economies.
The OECD was also less certain about the reaction of the financial markets to the rising inflation where there was a risk of higher market rates and volatility, Boone said even while she and the OECD was quite certain that the central banks will not get too concerned with the temporary price increases.
The OECD said until such time that vaccination is widespread enough in countries to protect the most exposed sectors, it is important for governments to keep up income support for households and companies.
The OECD has predicted a growth of 6.9 per cent in the economy of the United States because of a multi-trillion-dollar stimulus plan which was higher than the previous estimate of the organization of 6.5 per cent growth. However the OECD expected the economy to grow at 3.6 per cent in 2020 which was lower than the previous March forecast of the organization of an economic growth rate 4.0 per cent.