A rapid rollout of coronavirus vaccinations and Joe Biden's $1.9 trillion stimulus package will boost the global economic recovery from the pandemic this year, the Organisation for Economic Cooperation and Development (OECD) has forecast.
The Paris-based organisation issued a much more upbeat assessment of the world economy than its last forecast in November, predicting that India, China and the US will power a worldwide recovery.
Output across many sectors has already picked up as businesses have partially adapted to pandemic restrictions, the OECD said in its latest economic outlook on Tuesday.
Its report stated: “Vaccine rollout, although uneven, is gaining momentum and government stimulus, particularly in the United States, is likely to provide a major boost to economic activity.”
However, it cautioned that the rollout remains uneven and that the recovery is dependent on continued progress in tackling the public health emergency, with new, vaccine-resistant strains having the potential to derail progress on the economy.
“The outlook for growth would improve [upside scenario] if the production and distribution of doses accelerates, is better coordinated around the world and gets ahead of virus mutations,” the OECD said.
“This would allow containment measures to be relaxed more rapidly and global output to approach pre-pandemic projections for activity.
“But consumer spending and business confidence would be hit [downside scenario] if vaccination programmes are not fast enough to cut infection rates or if new variants become more widespread and require changes to current vaccines.”
India is set to top the global table for economic growth in 2021, according to the OECD’s estimates. The nation of 1.3 billion people is expected to see its economy expand 12.3 per cent, with China registering 7.8 per cent and the US 6.5 per cent.
The UK, which has seen its gross domestic product (GDP) fall by more than most other wealthy nations, is forecast to grow 5.1 per cent this year and 4.7 per cent next year.
Across the G20 group of economies, the OECD is pencilling in a 6.2 per cent expansion. Globally, it expects a 5.6 per cent rebound – 1.4 percentage points higher than it forecast four months ago.
The OECD again emphasised the positive role that higher government spending will play in boosting the recovery.
It pointed to Joe Biden’s $1.9 trillion (£1.4 trillion) stimulus package as being a key driver of economic growth not just in the US but worldwide.
The recently inaugurated US president is currently backing a series of measures, known as the American Rescue Plan, that will see investment in infrastructure and cheques handed to every citizen.
In light of the package, the OECD more than doubled its expectations for the US economy this year from 3.2 per cent growth to 6.5 per cent.
Experts have warned that the UK’s relative lack of government stimulus will drag the economy lower. The IPPR think tank found that Rishi Sunak’s measures, announced in the Budget on 3 March, are less than half as ambitious as Mr Biden’s.
Analysis by the Resolution Foundation think tank indicates that the UK government’s stimulus package is not large enough to counteract the drop in economic activity that the pandemic has caused meaning future growth will be lower than it could otherwise be with higher public spending.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies