By Tom Burnett CFA
On May 31, 2021, the Organization of Economic Cooperation and Development (“OECD”) issued its updated forecasts for global GDP growth in 2021 and 2022. The update builds on the December 2020 projections. In most cases, the growth estimates have been raised, but the current picture shows greater disparities between the developed and the emerging economies.
The latest forecast sees World GDP growth of 5.8% in 2021, a strong recovery from the decline of 3.5% experienced in 2020. Further growth of 4.4% is now expected in 2022. Both the 2021 and 2022 projections have been raised by 0.3% from the December 2020 forecasts. The details, however, show a wide range of economic growth as the world economies emerge from the Covid-19 outbreak and the countermeasures imposed to halt its spread.
China is the clear winner. It is the only major economy to register growth (2.3%) in the 2020 year. The OECD forecast for China this year is a robust 8.5% growth followed by 5.8% growth in 2022.
The U.S. economy shrank by 3.5% in 2020, but is expected to grow by 6.9% in 2021 and by 3.6% in 2022. Both forecasts are higher than the December 2020 projections.
The Euro area experienced a decline of 6.7% in 2020, but should recover sharply with growth of 4.4% expected in 2021 and 2022. The U.K. economy suffered from the Brexit uncertainties and fell by 9.8% in 2020, but the forecasts for 2021 and 2022 are positive 6.9% and 3.6% respectively.
Prospects for Mexico and Brazil are both projected to be weaker than for the World economies. Brazil is expected to grow by 3.7% this year and only by 2.5% in 2022. Mexico’s growth could reach 5.0% this year but is expected to fall back to only 3.2% in 2022.
In its overall statement, the OECD urges the developed countries to distribute their Covid-19 vaccines more quickly and more efficiently to the emerging economies whose growth prospects are not as bright.
Tom Burnett CFA is Director of Research