Priority of all large economies, must be the allocation of all necessary resources to produce Covid-19 vaccines and help push out global inoculation programs that are essential to saving lives, preserving incomes and ensuring a sustained economic recovery.
The cost of resources needed to provide vaccines to lower-income countries is small compared with the benefits all economies can reap through a “stronger and faster” economic bounce back, the Organization for Economic Co-operation and Development (OECD) said in its interim economic outlook on Tuesday.
The International Monetary Fund estimates faster progress on ending the health crisis will raise global income cumulatively by $9 trillion over 2020-25, benefitting all countries
“Sizeable risks [still] remain” for global growth, Laurence Boone, OECD chief economist, said. “Faster progress in vaccine deployment in all countries would enable restrictions to be lifted more quickly and enhance confidence and spending.”
However, slower progress in rolling out vaccines and the emergence of new virus variants that are resistant to some jabs will result in a “weaker recovery, larger job losses and more business failures, she warned.
The Paris-based OECD said the rebound from the pandemic has been faster than expected on the back of vaccine breakthroughs and mass inoculation programs. It expects the global economy to expand 5.6 per cent this year and 4 per cent in 2022. The IMF forecasts the global economy expanding 5.5 per cent this year and 4.2 per cent in 2022.
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 37-member OECD said.
“Prospects for an eventual path out of the crisis have improved … but there are signs of increasing divergence in activity developments across sectors and economies,” Ms Boone said.
Economic activity accelerated in the fourth quarter of 2020, despite new virus outbreaks in many countries and tighter containment measures across Europe, Asia and North America. The rebound was relatively fast in several large emerging-market economies, as activity moved above pre-pandemic levels in China, India and Turkey.
Output shortfalls remained mild in Asia-Pacific economies, including Australia, Japan and Korea.
In the US, strong fiscal support should strengthen demand substantially and enable a stronger recovery from the pandemic, with beneficial spillovers for other economies, particularly Canada and Mexico, the OECD said. An additional $1.9tn of US fiscal stimulus may boost the country’s GDP growth by over 3 percentage points this year, it said.
In contrast, European economies are expected to see a gradual bounce back, reflecting continued pandemic containment measures in the early part of 2021 and more limited fiscal support. The acceleration in vaccine deployment, should help build economic momentum, particularly in the UK.
The slow pace of vaccine deployment and limited scope for additional policy support is likely to moderate the recovery of emerging-market economies in Latin America and Africa, the OECD said.