Virus to slice at least 6% off world economy

OECD sees unprecedented loss of income as measures to contain virus take toll

PARIS: The global economy will contract at least 6% this year, with an unprecedented loss of income and “extraordinary uncertainty” caused by measures to contain the coronavirus outbreak taking a heavy toll, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday.

In the event of a second wave of contagion later in the year, the economic output could even shrink by as much as 7.6%, it warned. In both scenarios, recovery will be “slow and uncertain”. GDP growth should resume in 2021, by 5.2% if the virus is contained, and 2.8% if there is another infection wave, the OECD said in its latest outlook, entitled “World Economy on a Tightrope”.

It warned that by the end of next year, “the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments.” As unemployment rises, private debt levels in some countries are “uncomfortably high,” said the report, “and business failure and bankruptcy risks loom large.”

Back in March - when the outbreak had hit China but not yet the world’s other large economies - the OECD had slashed its global growth forecast by half a percentage point to 2.4%, which would have already been the worst performance since the 2008 financial crisis. Things have since gotten much worse as governments scrambled to rein in the pandemic by keeping people at home.

Economic activity in the OECD’s 37 developed member countries has collapsed, the report said, by as much as 20% or 30% in some cases in what it called “an extraordinary shock”.

Sectors affected by border closures and those requiring close personal contact, such as tourism, travel, entertainment, restaurants and accommodation, “will not resume as before”, said the OECD.  

Published in The Express Tribune, June 11^th, 2020.

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