Posters in the shop window, a closed shop, announce a “liquidation of shares” in Manchester, in the north of England, on 12 August 2020.
Paul Ellis | AFP | Getty Images
The world economy has performed better than expected, but production is still on track to decline “unprecedentedly,”; the Organization for Economic Co-operation and Development warned on Wednesday.
In its latest economic outlook, the OECD said the world economy will contract by 4.5% this year, an upward revision from an estimate made in June that pointed to a 6% drop of gross domestic product (GDP).
“The fall in world production in 2020 is less than expected, although it is still unprecedented in recent history,” the OECD said in its report.
In the future, the OECD expects the world economy to grow by 5% by 2021. However, the outlook “remains exceptionally uncertain” due to the coronavirus pandemic.
Critically affected sectors, such as the tourism and travel industries, have not fully recovered from the strict closure measures imposed earlier this year. Many countries are facing a resurgence in the number of infections. As a result, authorities could introduce new restrictions in the coming weeks to contain new waves, which would add more pressure on the world economy.
“Production increased rapidly after the easing of containment measures and the initial reopening of firms, but the pace of the global recovery has lost strength in the summer months,” the OECD said.
The Paris-based institution, an intergovernmental body that seeks to stimulate economic development, also warned of “considerable differences” between different countries.
China, the United States and the euro area are expected to perform better than initially expected in June. In comparison, growth expectations in India, Mexico and South Africa have worsened.
China will grow 1.8% in 2020, the only country in the OECD estimates that is expected to experience growth.
By contrast, the US economy will contract by 3.8% and the euro area by 7.9%.
The situation is even worse for India, Argentina, the United Kingdom, South Africa and Mexico, which are expected to collapse by more than 10%.