OECD cuts global growth forecast and warns of omicron risk

The OECD has warned that the COVID-19 omicron variant may be a threat to the global economic recovery and cut its projections for global growth in 2021, advocating for faster distribution of vaccines.

The world economy could grow 5.6% this year, the Organization for Economic Cooperation and Development anticipated in its projections (OECD), that is, a 0.1 point decrease compared to its previous forecasts made in September.

Meanwhile, the projections for activity in 2022 remain in line with their previous forecasts of a 4.5% expansion.

The agency indicated in this update of its forecasts that the sources of low vaccination may end up being the “breeding ground” for the most lethal forms of the virus.

This report does not contain estimates on the emergence of the omicron variant, detected a few days ago and whose consequences for the world economy are still uncertain.

During the presentation of the report, the chief economist of the OECD, Laurence Boone, expressed his concerns. “We are concerned that this new variant, omicron, adds uncertainty to the existing climate, which may pose a threat to recovery.”Economic, he affirmed.

The agency noted the existence of “very different economic realities”Between different regions and estimated that“recovery will remain precarious”As long as vaccines are not distributed throughout the world.

The report of this body based in Paris indicated that the global recovery is still underway, but that it has lost “imposed”.

The OECD indicated that it was still “cautiously optimisticAbout recovery.

However, he warned that inequalities in health systems, public policies, the difficulties of workers in some sectors and a more lasting rise in prices than anticipated are “key concerns”.

“Ensuring that vaccines are produced and deployed as quickly as possible around the world, including booster doses, remains the top priority.”, Indicated the organization. “Recovery remains precarious and uncertain in all countries until it is established”.

Fear of more variants “lethal”

In a more auspicious scenario, outbreaks could continue to cause movement restrictions, which can have lasting consequences on labor markets, production capacity and prices, the agency said.

“In a harsher scenario, low-vaccination outbreaks can end up being the breeding ground for the deadliest strains of the virus, which can damage lives and livelihoods.“Boone said in the report.

With respect to one of the key concerns weighing on the world economy, the OECD He indicated that he expects inflation to reach a peak later this year, before gradually giving way in the 38 countries that make up the body, which includes rich countries and developing nations such as Mexico and Chile.

Rising prices have sent markets shocking as investors fear central banks will raise rates earlier than expected to anchor inflation.

In this sense, OECD He urged those responsible for public policies to “communicate clearly” about their tolerance for inflation exceeding targets.

In the report, the agency highlighted that “marked imbalances”In the recovery between the different countries.

For the euro zone, the OECD projected a slight cut in its growth forecast for 2021 to 5.2% and for the United States, the OECD once again revised its forecasts, estimating a growth of 5.6% for this year and 3.7% for the next.

For China, the world’s second largest economy, the forecast was cut to an expansion of 8.1% this year and 5.1% in 2022.

For Brazil, the OECD it cut its forecasts for 2021 by 0.2 points, predicting growth of 5%, with an outlook also bleaker than in its previous report for next year, with a projected expansion of 1.4%, that is, 0.9 percentage points less.

After this slowdown, the agency projects growth of 2.1% in 2023.

The OECD He indicated that the global recovery and strong demand for raw materials and the weak exchange rate sustained Brazilian exports, but pointed out that there are supply disturbances, a fall in purchasing power and an increase in interest rates.

In addition, he noted the uncertainties about the behavior of the public sector slowed the pace of the recovery.