Although the pandemic has affected and will affect many countries, the OECD estimates that the global economy will gain momentum in the next two years, fueled by vaccine launches and government support. In 2020 the world economy has had a sharp fall, due to the closure of businesses and confinement measures, to avoid contagion by the coronavirus.
It was not possible to have a quick recovery, due to the new waves of infections that have affected many countries, while the first wave continues in others. Tensions in the economy will continue due to the management of the pandemic. Economic activities must be carried out remotely for a few quarters. The evolution of the sectors of the economy will be different: some will recover and others will remain stagnant.
The economic recovery will be different for each country, some may grow, such as China, while
that in others poverty will worsen. Photo: Reformation.
Several factors will contribute to the control of the virus and the GDP growth forecast by the OECD for 2021 and 2022: scientific progress, pharmaceutical advances, more effective tracing and isolations, and adjustments in the behavior of people and companies. In this way, restrictions on mobility will have to be gradually eliminated.
The agency recognizes that policies to support jobs and businesses, which have been in place since the beginning of the pandemic, will allow a faster recovery when the restrictions can be ended.
The economic recovery will be different for each country, some may grow, such as China, while in others poverty will worsen. Photo: Pixabay.
In 2020 world production, measured by GDP, has fallen 4.2%; However, the OECD, made up of 37 member countries, estimates that by the end of 2021 it will return to the levels recorded before the pandemic. In its projection of world GDP for 2021, it indicates that it will increase by about 4.25% and there will be another increase of 3.75% in 2022. The fiscal support that has been provided in 2020 will pay off, and will continue to be necessary. The rebound will be stronger and faster as activities are reopened, limiting the loss of revenue caused by the crisis.
The agency considers that the recovery will be uneven among countries, and this would cause long-term changes in the world economy. Those with effective testing systems, monitoring of contagions, effective isolation to avoid them, and where vaccines are implemented more quickly, are likely to perform well; however, the general weakness in world demand will hold them back. China had started to recover before and now it will grow strongly, next year it will have an estimated growth of 8%, equivalent to more than a third of world economic growth.
The economy of the countries incorporated into the OECD will have a partial recovery from the recession of this year, they will register a growth of 3.3% in 2021. Efficient vaccination campaigns and an improvement in cooperation between countries could accelerate the distribution of the vaccine ; But the resurgence of the virus may force governments to tighten restrictions on economic activity, especially if the distribution and application of vaccines are slow. The severity of the impact of the pandemic on the economy can increase the risk of financial crises, it would affect fragile companies too much and there would be global spillovers.
The pandemic will damage the socioeconomic fabric of all countries. If in 2022 production is kept around 5% below expectations before the crisis, it is possible that the pandemic causes permanent and substantial costs. The most vulnerable sectors of the population will suffer disproportionately, those who have lost their jobs have little chance of rejoining the labor market soon, those living in poverty have seen their condition deteriorate. Children and youth who face difficulties learning and working from home will suffer damage that could be lasting.
The OECD adds that governments should continue to help those most affected by the pandemic, ideally their health and economic policies go hand in hand. Public health measures should be increased to limit the impact of outbreaks and associated restrictions. It is also critical that policymakers ensure continued fiscal support to keep associated industries, businesses and jobs going.
Regarding Mexico, the OECD indicates that despite the 2020 fall in GDP, the following is expected:
A growth of 3.6% in 2021 and 3.4% in 2022, which will be driven by exports, especially from manufacturing companies integrated in global value chains. Slight recovery in private consumption, which will have to be strengthened by remittances, especially those from the United States. Slow improvement in the labor market and greater confidence with the distribution of the vaccine. Inflation will be kept at low levels. The pandemic causes an increase in poverty, inequalities and gender gaps. Macroeconomic policies promote recovery. A support and training program could be included for the most affected workers in the formal and informal sectors. The temporary reduction in payroll taxes could help more SMEs and support formal employment. Promoting private investment will be critical to achieving a stronger recovery.
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