Oecd says global growth sinks in recession for coronavirus
PARIS: The World Organization for Economic Cooperation and Development (OECD) warned on Monday that it is plunging the world economy into its worst recession since the global financial crisis, urging governments and central banks to fight to avoid further depression pronounced
The global economy will grow by only 2.4% this year, the lowest since 2009 and below a 2.9% forecast in November, the OECD said in an update on its outlook.
The Paris-based policy forum projected that the global economy could recover to 3.3% growth in 2021, assuming that the epidemic peaked in China in the first quarter of this year and that other outbreaks were mild and contained.
However, if the virus spreads throughout Asia, Europe and North America, global growth could fall to 1.5% this year, the OECD warned.
The main message of this negative scenario is that it would put many countries in recession, so we are urging that measures be taken in the affected areas as quickly as possible, OECD chief economist Laurence Boone told Reuters.
She said governments should support health systems with extra payment or tax relief for workers who perform overtime and short-term work plans for companies struggling with a drop in demand.
Governments could provide companies with greater financial relief by cutting social burdens, suspending value-added taxes and granting emergency loans for particularly difficult sectors, such as travel, Boone said.
In a nod to some European countries such as fiscally conservative Germany, he said that governments should not worry about spending limits while letting programs such as unemployment insurance do their job to soften the blow of the recession.
Meanwhile, central banks could provide comforting signals to stressed financial markets that they are ready to further facilitate monetary policy and provide liquidity to banks if necessary.
We don't want to add a financial crisis to the health crisis, Boone said.
Officials of the US Federal Reserve In the USA, the European Central Bank and the Bank of Japan have indicated in recent days that they are ready to do more if necessary.
If the situation deteriorates, a coordinated response of the central bank's flexibility and the fiscal stimulus that amounts to 0.5% of economic production in the G20 countries could lead to an increase of 1.2% more in two years, calculated the OECD.
A coordinated response from health, fiscal and monetary policy of the G20 would not only send a strong message of confidence but also multiply the effect of national actions, Boone said.
So far, international coordination seems to be limited to the Group of Seven Nations, whose finance ministers will hold a conference call this week, French finance minister Bruno Le Maire said Monday.
In the OECD base case, in which the situation does not deteriorate dramatically, China would withstand the worst part of the recession this year, reducing its forecast for 2020 to a minimum of 30 years of 4.9%, down from 5.7% in November.
The second largest economy in the world would recover to pre-coronavirus levels in 2021 with growth of 6.4%, according to the OECD forecast, but not before the impact of its recession extended much further.
In the euro area, where the number of cases increases rapidly, there was a growth of 0.8%, below 1.1% in November, with Italy seeing flat growth this year as it struggles to contain a jump in the cases. The growth of the euro zone increased to 1.2% in 2021.
It was observed that the virus had a limited impact on the growth of EE. UU., Which was seen at 1.9%, below 2% in November. Growth would rise to 2.1% in 2021, according to the OECD forecast.