The global economy will recover from COVID-19 faster than expected, but new stimulus is still needed, OECD says
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- The global economy is set to shrink less than initially expected this year, the Organization for Economic Co-operation and Development said Wednesday.
- The organization lifted its outlook for global growth this year to a 4.5% contraction, an improvement from June's forecast for 6% shrinkage.
- The OECD noted the rebound is highly dependent on continued support from governments and central banks.
- China is the only G-20 country expected to grow in 2020, according to the organization.
- The US and euro area economies are expected to contract by 3.8% and 7.9%, respectively.
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The world economy is on track to recover faster from coronavirus fallout than initially expected in 2020, the Organization for Economic Co-operation and Development said Wednesday.
The organization lifted its official outlook for global growth while noting the rebound is slowing and requires steady monetary and fiscal policy support. The OECD now expects the world economy to shrink by 4.5%, an improvement from its June forecast of a 6% contraction.
Group of 20 economies are projected to slightly outperform the rest of the world with a 4.1% slide. China drove much of the improved outlook, as the country is the only G-20 member expected to grow this year. The US economy will shrink 3.8%, while the euro area will tumble 7.9%, the OECD said.
The organization's improved outlook follows the release of better-than-expected economic data throughout major economies. Many of those readings were driven by unprecedented fiscal stimulus and monetary easing efforts. Yet country's first relief programs are drying up and expiring.
That crumbling support has already slowed the pace of some economic recoveries, the OECD said. Governments and central banks should keep aid measures in place for as long as necessary and consider taking stronger actions to accelerate employment, curb bankruptcies, and promote sustainability, the organization added.
The OECD's latest forecast differs from its June projections in how it foresees the coronavirus spreading through the rest of the year. While the previous report called for a single wave of COVID-19 infections, the organization's new outlook anticipates smaller outbreaks and local policy responses continuing.
The projections remain "extraordinarily uncertain and dependent on the virus, policies, people's behaviour and ultimately confidence," the OECD said.