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The outlook for major global economies is improving, says the OECD



In a report released Wednesday, the Organization for Economic Co-operation and Development updated its forecast for global economic output this year, noting that while the declines were still “unprecedented in recent history,” the outlook has improved slightly. from June.

The Paris-based agency said it now expects the world economy to shrink by 4.5% in 2020 before expanding by 5% in 2021. Previously, the OECD had said that the global economy it would contract by 6% this year and grow by 5.2% next year. .

But the agency, which represents the world’s largest economies, warned that the headline data masks important discrepancies. While it has significantly strengthened its 2020 forecast for the US and China, and slightly improved the outlook for Europe, the OECD has lowered its expectations for developing countries such as Mexico, Argentina, India. South Africa, Indonesia and Saudi Arabia.

OECD economists said the downgrades reflect “the prolonged spread of the virus, high levels of poverty and informality, and tougher prison measures for an extended period.”

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China is the only G20 country for which production is expected to increase in 2020, with its economy growing by 1.8%, compared with a contraction of 3.8% in the United States and a decline in the 7.9% among the 19 countries that use the euro. Beijing reported Tuesday that retail sales were higher in August than the previous year – the first time sales increased in 2020.

The OECD noted the early timing of the country’s outbreak and its ability to quickly bring it under control, as well as the policies that have paved the way for a rapid recovery in activity, notably pointing to strong infrastructure investments.

Meanwhile, according to the OECD, South Africa’s economy could shrink by 11.5% this year. The economies of Mexico and India are both on track for a 10.2% contraction. It is worse than expected for developed economies with the exception of Italy, which should contract by 10.5% after being hit hard by the virus.

‘Uncertainty remains high’

The OECD has warned that its prospects are far from defined and much depends on the trajectory of Covid-19 infections and continued support from policy makers. He added that the global recovery “lost some momentum during the summer months” after an initial boom in activity.

“A recovery is now underway after the loosening of severe confinement measures and the reopening of businesses, but uncertainty remains high and confidence is still fragile,” the agency said in its report.

Some of his estimates also depend on political assumptions that may not materialize.

The OECD assumes, for example, that the UK will reach a “basic” free trade agreement for goods with the European Union. But the talks could be interrupted by a controversial bill tabled by Prime Minister Boris Johnson’s government, which would breach the terms of a previously negotiated divorce settlement.

The agency expects the UK economy to shrink by 10.1% this year, a slight improvement from the latest estimate.

The OECD is also counting on US lawmakers to approve another stimulus package of up to $ 1.5 trillion this fall, even as negotiations have reached a dead end. Reaching an agreement could be more difficult as the November elections approach.

The group’s forecasts for the global recovery in 2021 are slightly lower than in June. OECD economists have made it clear that they see a long way to go.

“In most economies, the level of production at the end of 2021 is expected to remain below that at the end of 2019 and considerably weaker than predicted before the pandemic, highlighting the risk of lasting costs of the pandemic,” the report said. said.


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