The Organization for Economic Cooperation and Development has raised its forecast for global economic growth in 2020 but cautioned that the recovery from the coronavirus pandemic remains uncertain and fragile.
In its latest interim economic assessment released on Wednesday, the OECD said it now expects the world economy to shrink by 4.5% this year before expanding by 5% in 2021. In June, it had estimated the global economy would contract by 6% in 2020 and grow 5.2% next year.
“After an unprecedented collapse in the first half of the year, economic output recovered swiftly following the easing of containment measures and the initial re-opening of businesses,” the report said.
But the OECD noted that the pace of the global recovery has lost momentum since June as countries have imposed new restrictions to combat resurgences of the virus and that the upward revision to global growth in 2020 masks considerable variations across countries.
While the OECD significantly boosted its 2020 forecasts for the U.S. and China, and slightly raised the outlook for Europe, it lowered its expectations for developing countries such as Mexico, Argentina, India, South Africa, Indonesia, and Saudi Arabia.
“Uncertainty remains high and confidence is still fragile,” the OECD said, adding that future growth will depend on, among other things, the magnitude and duration of new COVID-19 outbreaks, the deployment of an effective treatment or vaccine, and the extent to which significant fiscal and monetary policy actions support demand.
China is the only G20 country in which output is projected to rise in 2020, with the OECD forecasting a 1.8% gain. The expected contraction in the U.S. was revised upward to 3.8% from 7.3% in June but the group said it was assuming that Congress will approve a further stimulus package, worth up to $1.5 trillion, this fall.
The slightly lower global growth forecast for next year, the group said, reflects projections that in most economies, the level of output at the end of 2021 will remain below that at the end of 2019 and will be “considerably weaker than projected prior to the pandemic.”