OECD: World economy shrinks significantly in fourth quarter

The industrial nations organization expects a decline in economic output due to the “resurfacing pandemic”. In a global comparison, however, Germany is doing quite well.

The coronavirus pandemic and the lockdowns and travel restrictions it was designed to contain have shaken the global economy.

Dhe world economy is stumbling again due to the second corona wave in western countries, according to the industrial nations organization OECD. It will shrink by 3 percent in the current fourth quarter compared to the previous year, according to the forecast published on Tuesday by the Organization for Economic Cooperation and Development (OECD).

“Europe and North America in particular are currently suffering from the flare-up pandemic that has halted the economic upturn,” she emphasized. In the euro zone, economic output is likely to decline by 7.3 percent in the final quarter and by 3.2 percent in the United States. “With the prospect of a vaccination and a more successful handling of the virus there is hope again,” said OECD chief economist Laurence Boone. “But the situation is still extremely worrying.”

The OECD predicts that the German economy will recover from the corona recession in the coming year. The gross domestic product will grow by 2.8 percent in 2021 and by 3.3 percent in 2022. For the current year, however, a slump of 5.5 percent is expected, as consumers are likely to consume less and companies are likely to invest less. A decline in exports is also expected. Compared to other industrialized countries, the recession is rather mild. The eurozone as a whole is likely to shrink by 7.5 percent this year.

“Light at the end of the tunnel”

“Germany is doing quite well in an international comparison,” said the head of the OECD Berlin Center, Nicola Brandt, to the Reuters news agency. “On the one hand, this is due to the fact that the German economy – unlike Italy and Spain, for example – does not depend so much on sectors that have suffered particularly badly from the pandemic, such as tourism.” for example when testing and in intensive care units, larger than in other countries.

The euro zone is expected to grow by 3.6 percent in 2021 and by 3.3 percent in 2022. Among the major economic powers, the OECD only believes that China will grow this year: there it could grow by 1.8 percent, followed by growth of 8.0 percent in 2021 and 4.9 percent in 2022. America, the world’s largest economic power, will initially shrink by 3.7 percent and then grow by more than 3 percent in each of the next two years.

With the development of vaccines, the OECD sees light at the end of the tunnel. “It is important to maintain fiscal and monetary policy support during this time in order to prevent an even deeper crisis,” said Brandt. Politics should promote sustainable growth, for example by investing in digitization, climate-friendly infrastructure and education. School closings should be avoided.

“We observe that children from lower-income households in particular fell behind sharply in the spring,” said Brandt. “That puts a strain on economic and innovative strength in the long term and must therefore not be repeated.”