OECD warns of ‘uneven’ global Covid recovery as it downgrades bumper UK growth forecasts – and upgrades estimates for inflation
- OECD has downgraded growth forecasts for the UK and other major economies
- Warned that the recovery from pandemic will be ‘uneven’ with supply disruption
- UK is still expected to be the fastest-growing G7 nation this year after big hit
The OECD gave a stark warning that the Covid recovery will be ‘uneven’ today as it downgraded growth forecasts for the UK – and upgraded inflation estimates.
The economic body said there were likely to be ‘strikingly’ different fortunes for countries in the next phase of the pandemic.
It has revised down prospects for a swathe of major states, including the US, Canada and Germany compared to previous figures from May. But France and Italy saw their numbers bumped up.
Britain had 0.5 percentage points trimmed off expectations for real GDP growth this year, although it is still set to be the fastest-growing G7 member after taking the biggest hit from Covid.
The OECD also reeled back the forecast for 2022 by 0.3 percentage points to 5.2 per cent.
And in a move that could worry ministers, it nearly doubled estimates for inflation to 2.3 per cent this year and 3.1 per cent next year – although it suggested the effects are likely to be temporary.
The OECD said there were likely to be ‘strikingly’ different fortunes for countries in the next phase of the pandemic
The OECD nearly doubled estimates for UK inflation to 2.3 per cent this year – although it suggested the effects are likely to be temporary
In its interim Economic Outlook, the OECD said the bounceback had been driven by stimulus measures, vaccine rollouts, and easing of lockdowns..
But the Paris-based organisation voiced concerns about lower vaccination rates in poorer countries.
‘The recovery remains very uneven, with strikingly different outcomes across countries,’ the OECD said in its interim economic outlook.
Global gross domestic product has surpassed its pre-pandemic level and is now expected to expand by 5.7 per cent this year, down 0.1 percentage points from the previous forecast in May.
But the outlook for 2022 has slightly improved, with 4.5 per cent growth now expected, up by 0.1 points.
‘Output and employment gaps remain in many countries, particularly in emerging-market and developing economies where vaccination rates are low,’ the report said.
It warned that while the impact of the Delta variant had ‘so far been relatively mild’ in countries with high vaccination rates, it had hit momentum elsewhere and added pressures to global supply chains and costs.
‘Sizeable uncertainty remains,’ the report said, warning that slow progress in vaccination drives and the spread of virus mutations would lead to a weaker recovery and more job losses.
‘What worries us even more is that many emerging markets with the exception of China are still far behind advanced ones for vaccination programme levels,’ Boone said.
‘The situation is even worse in low income countries.’
The OECD lowered its growth outlook for the United States, from 6.9 to 6.0 per cent this year. That is well below the US Congressional Budget Office forecast of 6.7 per cent.
The estimate for the Eurozone was raised by one point to 5.3 percent, though prospects varied widely within the bloc.
The growth prospects of Argentina, Brazil, Mexico, South Africa, South Korea and Turkey have also improved, while those of Australia, Japan and Russia were lowered.
The forecast for China, the world’s second biggest economy and a driver of global growth, remained unchanged at 8.5 percent.
The UK had 0.5 percentage points trimmed off expectations for real GDP growth this year, although it is still set to be the fastest growing G7 member, after taking the biggest hit from Covid