The COVID-19 pandemic has triggered the most severe recession in nearly a century and the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections, the Organization for Economic Cooperation and Development (OECD) said in its latest Economic Outlook published on Wednesday.
With little prospect of a vaccine becoming widely available this year, and faced with unprecedented uncertainty, the OECD has taken the unusual step of presenting two equally likely scenarios, one in which the virus is brought under control, and another in which a second global outbreak hits before the end of 2020.
If a second outbreak occurs triggering a return to lockdowns, world economic output is forecast to plummet 7.6 percent this year, before climbing back 2.8 percent in 2021. At its peak, unemployment in the OECD economies would be more than double the rate prior to the outbreaks, with little recovery in jobs next year.
If a second wave of infections is avoided, global economic activity is expected to fall by 6 percent in 2020 and OECD unemployment to climb to 9.2 percent from 5.4 percent in 2019.
Euro area GDP is expected to plunge by 11.5 percent this year if a second wave breaks out, and by over 9 percent even if a second hit is avoided, while GDP in the United States will take a hit of 8.5 percent and 7.3 percent respectively, and Japan 7.3 percent and 6 percent.
Emerging economies such as Brazil, Russia and South Africa, meanwhile, face particular challenges of strained health systems, adding to the difficulties caused by a collapse in commodity prices, and their economies plunging by 9.1 percent, 10 percent, and 8.2 percent respectively in case of a double hit scenario, and 7.4 percent, 8 percent and 7.5 percent in case of a single hit.
China's and India's GDPs will be relatively less affected, with a decrease of 3.7 percent and 7.3 percent respectively in case of a double hit and 2.6 percent and 3.7 percent in case of a single hit.
In both scenarios, the recovery, after an initial, rapid resumption of activity, will take a long time to bring output back to pre-pandemic levels, and the crisis will leave long-lasting scars -- a fall in living standards, high unemployment and weak investment. Job losses in the most affected sectors, such as tourism, hospitality and entertainment, will particularly hit low-skilled, young, and informal workers, the OECD said.
"Uncertainty is clearly extreme in the current context, but the implications of that for macroeconomic policies are not symmetric. Policy-makers were right not to be too slow to introduce emergency measures, and they should now guard against being too quick to withdraw them," said OECD Secretary-General Angel Gurria.
"How governments act today will shape the post-COVID world for years to come," he added.
"This is true not only domestically, wher the right policies can foster a resilient, inclusive and sustainable recovery, but also in terms of how countries cooperate to tackle global challenges together," he said. "International cooperation, a weak point so far in the policy response, can create confidence and have important positive spillover effects."
The OECD in the report called for stronger international cooperation to help end the pandemic more quickly, speed up economic recovery, and avoid harming the catch-up process of emerging market economies and developing countries.
It also argued for more resilient supply chains, including larger holdings of stocks and more diversification of sources locally and internationally.
