OECD downgrades global economic growth forecast, warns of precarious recovery

On September 21, the Organization for Economic Co-operation and Development (OECD) lowered its forecast for global economic growth and warned that the progress of the world economic recovery was taking place with uncertainty.

Production workers at a Skyworth factory in Guangzhou, capital of Guangdong province, China. Photo: THX
Production workers at a Skyworth factory in Guangzhou, capital of Guangdong province, China. Photo: THX

The OECD assessed that from the beginning of 2021 until now, the world economy has begun to recover thanks to the stimulus measures that governments have applied, the promotion of vaccination against COVID-19 and many economic activities have slowed down. resumed.

However, the economic recovery picture is still uncertain and there are still many differences between countries and regions. The OECD forecasts global economic output will grow by 5.7% in 2021, down 0.1% from its previous forecast in May. Meanwhile, the global economic growth rate in 2022 is 4.5%, up 0.1% compared to the previous forecast.

According to the OECD, there are still disparities in economic output and employment between countries, especially the group of emerging and developing economies with low vaccination coverage, which is lagging far behind. The OECD sharply lowered its forecast for US economic growth from 6.9% to 6% in 2021. Previously, the US Congressional Budget Office forecast the US economy to grow 6.7% this year. now on.

Meanwhile, the Eurozone economy is forecast to grow 5.3% in 2021, higher than the forecast in May. However, each Eurozone member country will also have different growth rates, in which countries such as France, Italy and Spain are in the group with higher growth rates while the German economy will grow more slowly.

In its latest report, the OECD also raised growth forecasts for countries such as Argentina, Brazil, Mexico, South Africa, South Korea and Turkey while lowering growth forecasts for the economies of Australia, the United Kingdom, and Japan. Japanese and Russian.

China's growth forecast remains unchanged at 8.5%. According to the Vietnam News Agency correspondent in Seoul, the OECD has raised the growth outlook for the Korean economy in 2021 to 4%, up 0.2% from the estimate made in May this year. The Paris-based organization also raised its 2022 growth forecast for the Northeast Asian country to 2.9% from its previous estimate of 2.8%.

The OECD warned that the outlook for a global economic recovery will remain uncertain and unstable until a vaccine against COVID-19 is rolled out globally. The organization called on governments to encourage people to get vaccinated as soon as possible to save lives, income and control the disease. If global control of the SARS-CoV-2 virus cannot be guaranteed, the risk of new, more contagious variants will continue.

The organization assessed the economic impact of the highly contagious disease situation with the emergence of the Delta variant in countries with high vaccination rates today to be quite mild. In many places, however, this variation has dampened the momentum of the economic recovery and increased pressure on global supply chains and costs. According to the OECD, rotation activity in Asia-Pacific countries has slowed down significantly as restrictive measures have been reintroduced to prevent the spread of the Delta variant.

The OECD urges central banks to maintain flexible monetary policy, providing clear guidance on upcoming moves and the range of inflation targets that banks can accept. Meanwhile, governments need to continue to be flexible and maintain policies in line with the country's economic situation. The OECD emphasized that governments should avoid withdrawing economic support measures too soon and suddenly, given the uncertain short-term economic outlook.

The OECD emphasized that the faster the pace of vaccination is, the more household savings fall, the higher the demand will be and the lower the unemployment rate will be, but these factors will create momentum to push up inflationary pressures. in short term.

Conversely, the slower vaccination and new variants continue to emerge, the weaker the economic recovery will be and the more unemployed workers will be. Earlier this month, United Nations Secretary-General Antonio Guterres expressed disappointment that countries producing COVID-19 vaccines could not accelerate production to help the world meet its goal of immunizing 70% of the population by the second half of the year. early 2022. He said that while COVID-19 is "waking up", the world continues to "sleep".

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