Daily Management Review

Worst Peace Time Recession In A Century For Global Economy Due To Pandemic, Predicts OECD


Worst Peace Time Recession In A Century For Global Economy Due To Pandemic, Predicts OECD
According to the most recent assessment of the Paris based think tank Organisation for Economic Cooperation and Development (OECD), the biggest peace-time downturn in a century will hit the global economy because of the ongoing novel coronavirus pandemic before it is able to recover in the next year. 
For the current year, there can be a contraction of as much as 6 per cent I the global economy because of the pandemic while it will stage a recovery with a growth of 5.2 per cent in 2021 provided that the pandemic is kept under control, the OECD said in its updated outlook for the global economy.
However there can be a contraction of 7.6 per cent contraction in the global economy if the pandemic strikes the world for a second time this year, which will also consequently reduce the projected growth for next year to only 2.8 per cent, said the Paris-based policy forum.
“By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments,” OECD chief economist Laurence Boone wrote in an introduction to the refreshed outlook.
She argued that government should not be averse to incurring debt in order to spend more so that low paid workers and investments are supported because the manner in which governments would respond and react to the pandemic crisis will shape the economic and social prospects for the coming decade.
“Ultra-accommodative monetary policies and higher public debt are necessary and will be accepted as long as economic activity and inflation are depressed, and unemployment is high,” Boone said.
This was not the right time to give any boost to trade tensions while government should be more cooperative about a treatment and vaccine for the virus because of the threat of a second wave of contagion will keep uncertainty in the global economy high, Boone said.
The OECD predicted that there will be contraction of 7.3 per cent in the United States economy, the largest in the world, for the current year before staging a recovery of 4.1 per cent growth n the next year. However the contraction of the US economy will touch 8.5 per cent this year in the case of a second wave of the pandemic with the growth prospect for 2021 dropping down to only 1.9 per cent, the economic think tank forecast.
At the same time, the OECD predicted a contraction of 9.1 per cent for the euro area economy for the current year with a growth of 6.5 per cent in 2021. However in the eventuality of a second wave of the pandemic, the contraction will increase to 11.5 per cent while 2021 growth will only be about of 3.5 per cent.