OECD Economic Outlook, December 2020

A brighter outlook but recovery will be gradual

Faster vaccine deployment and better cooperation for its distribution would boost confidence and strengthen the pickup but continued uncertainty risks further weakness

Vaccination campaigns, concerted health policies and government financial support are expected to lift global GDP by 4.2% in 2021 after a fall of 4.2% this year. The recovery would be stronger if vaccines are rolled out fast, boosting confidence and lowering uncertainty.

Delays to vaccination deployment, difficulties controlling new virus outbreaks and failure to learn lessons from the first wave would weaken the outlook.

The bounce-back will be strongest in the Asian countries that have brought the virus under control but even by the end of 2021, many economies will have shrunk from 2019 levels before the pandemic.

What can governments do?

The prospect of a number of COVID-19 vaccines becoming widely available next year has raised hopes that recovery is in sight. But the path remains long and difficult. Achieving a stronger, sustainable and inclusive global economy will require determined policy action now. Governments should maintain exceptional fiscal support and ensure that the money reaches those who need it the most by:

STRENGTHENING PUBLIC HEALTH POLICIES

Invest in health workers, systems and capacity. Test, trace and isolate effectively. Implement clear social distancing rules to avoid strict lockdowns. Start planning vaccination programmes. Coordinate internationally to ensure affordable vaccines and treatments are widely available.

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SUPPORTING PEOPLE

The pandemic has worsened inequality and will mean high unemployment for years to come. We need to protect the incomes of the low-skilled and the vulnerable, improve training schemes and access to the labour market. Job retention schemes should evolve to also help increase opportunities.

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SUPPORTING BUSINESSES

Small businesses, which have been badly hit by the crisis, need grants, not more debt, in order to survive. Grants can help them adapt, by exploiting digital technology for instance, and investing for the future.

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SUPPORTING CHILDREN

Lockdowns and school closures have meant many children, particularly from poor backgrounds, have fallen further behind in their education, worsening their future prospects. They need help catching up through investment in teaching skills, equipment and connectivity.

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GDP projections

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doi: 39a88ab1-en

OECD Economic outlook

December 2020

(Number 108)

The COVID-19 pandemic will cast a long shadow and raises uncertainty over the world’s economies. This issue of the OECD Economic Outlook analyses the impacts of COVID-19 on the economy and puts forward projections for output, employment, prices, fiscal and current account balances.

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