According to Organisation for Economic Co-operation and Development (OECD) projections, the US recovery boosted by President Joe Biden’s stimulus package, which would also help global economic upswing faster than expected, potentially leaving Europe behind.
After major economies exhibited increased resilience at the end of 2020, and as proof of vaccine effectiveness increases, policymakers add additional market support, on which the Paris-based organisation now expects global production to rise above pre-pandemic levels by mid-2021.
The increase in global growth forecast for 2021 is from 4.2 percent to 5.6 percent, and increased its forecast for the United States to 6.5 percent from 4.2 percent. According to OECD models, Biden’s policies would increase production by 3% to 4% on average in the first full year of implementation.
The sharp upward revisions reflect the immense uncertainty surrounding and the recovery from the worst economic recession in living memory. The US borrowing rates and oil prices have returned to pre-crisis levels in recent weeks, sending ripples through global markets.
As a result, increasing inflation expectations are placing pressure on central banks, which are attempting to ensure a smooth recovery by maintaining their current accommodative policies, as there is an increasing divide between sectors and geographies. The OECD expects positive spillovers for some other economies, especially Canada and Mexico, as the US surges ahead with a 2021 growth rate similar to China’s 7.8% than the euro area’s 3.9 percent.
As per OECD projections for this year and next, some European economies, such as Italy, Spain, and the United Kingdom, will not be able to make up for lost GDP in 2022. Separately, euro-area GDP data released on Tuesday showed the 19-nation bloc contracted 0.7 percent in the final three months of 2020, 0.1 percentage points higher than previously estimated.
