The global economy will contract by 4.5% in 2020, according to the Organization for Economic Cooperation and Development (OECD).
While the global economy has surpassed expectations, it may still face “unprecedented” decline in output, the organization said.
The OECD pointed out that the 4.5% contraction this year suggests an upward revision from an estimate noted in June that presented a 6% decline in gross domestic product (GDP).
“The drop in global output in 2020 is smaller than expected, though still unprecedented in recent history,” the OECD said in its economic outlook.
Moreover, the organization predicts a 5% growth for the global economy in 2021. The outlook “remains exceptionally uncertain” because of the effects of the pandemic.
Travel, tourism, and other badly-hit sectors have not completely recovered from the lockdowns imposed earlier this year. Countries are addressing a resurgence in the number of coronavirus cases. With this, officials may implement new restrictions in the coming weeks to prepare for new waves. This may fuel pressure on the world economy.
“Output picked up swiftly following the easing of confinement measures and the initial re-opening of businesses, but the pace of the global recovery has lost some momentum over the summer months,” the OECD said.
In June, the International Monetary Fund (IMF) slashed its economic forecasts as the world suffers from the coronavirus crisis.
The IMF predicts the economy will contract by 4.9% in global gross domestic product in 2020, lower than the 3% fall it predicted in April.
“The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,” the IMF reported Wednesday in its World Economic Outlook update.
IMF also reduced its GDP forecast for 2021, predicting a growth rate of 5.4% from the 5.8% forecast made in April.
According to the fund, the downward revisions were caused by social distancing measures that may remain during the second half of the year. These measures have affected productivity and supply chains. IMF expects that longer lockdowns will hit economic activity even more.
The IMF warned that the economic predictions still face unprecedented uncertainty. Meanwhile, economic activity will be shaped by factors such as global supply chains, the length of the pandemic, social distancing, and new labor market dynamics.
The US economic growth will hasten in 2021 as the country recovers from the coronavirus pandemic, Dallas Federal Reserve President Robert Kaplan says.
“In ’21, we will see an above-trend growth, and we will continue to grind down the unemployment rate,” Kaplan said during an interview on CNBC’s “Closing Bell.” “I still believe if we follow these protocols, we would see a rebound from the deep hole we dug in the second quarter.
Kaplan predicts a contraction of 4.5% or 5% in the US economy this year as the coronavirus lead to unforeseen disruptions.