The coronavirus pandemic-induced economic crisis could cause global GDP to plummet by 7.6%, the Organization for Economic Co-operation and Development warned in its economic outlook published Wednesday.
The figures in its latest outlook signify more than twice the devastation to the economy than its previous forecast released in early March, before the full extent of the crisis became apparent.
“As long as no vaccine or treatment is widely available, policymakers around the world will continue to walk on a tightrope,” Laurence Boone, the OECD chief economist, wrote in the introduction to the new outlook.
Amid mounting uncertainty over how the pandemic will play out, the international economic organization released two forecasts — one in which the virus is controlled by the end of the year, and one that accounts for a second global outbreak.
In the absence of a vaccine — and if a second outbreak occurs by the end of the year, causing lockdown measures to be reinforced — the OECD predicts global GDP will plummet by 7.6% in 2020 and climb back 2.8% in 2021. This means unemployment is expected to rise at more than double the rate prior to the outbreak in OECD countries.
In their other scenario, where a second wave of COVID-19 is avoided, global GDP is still forecast to fall by 6% in 2020, the OECD said.
For context, in 2019, global GDP growth was up by 2.7%.
The figures in the new outlook are much more dire than the OECD’s previous economic outlook released in March, before the height of the pandemic. On March 2, the organization forecast, in a worst-case scenario, that annual global GDP could drop to 1.5% growth.
In the new outlook, GDP in the United States is expected to fall by 8.5% if a second wave hits and 7.3% even without a second wave. In Europe, GDP is forecast to fall by 11.5% if a second wave hits, and 9% even without.
The economists called for increased international cooperation to end the pandemic and boost economic recovery.
The outlook also highlighted the need for more resilient supply chains.
“How governments act today will shape the post-COVID world for years to come,” OECD Secretary-General Angel Gurría said in a statement. “This is true not only domestically, where the right policies can foster a resilient, inclusive, and sustainable recovery, but also in terms of how countries cooperate to tackle global challenges together. International cooperation, a weak point so far in the policy response, can create confidence and have important positive spillover effects.”
OECD Chief Economist Laurence Boone added that “extraordinary policies will be needed to walk the tightrope towards recovery.”
“Restarting economic activity while avoiding a second outbreak requires flexible and agile policy-making,” she added.
“Governments must seize this opportunity to build a fairer economy, making competition and regulation smarter, modernizing taxes, government spending and social protection,” Boone said. “Prosperity comes from dialogue and cooperation. This holds true at the national and global level.”