LONDON (ICIS)--Global economic output will fall 7.6% in 2020 with soaring unemployment if a second coronavirus outbreak takes hold by the end of the year, the OECD said on Wednesday.
If a new wave of infections is avoided, economic activity is expected to drop 6%, the organisation said in its latest Economic Outlook.
“If a second outbreak occurs triggering a return to lockdowns, world economic output is forecast to plummet 7.6% this year, before climbing back 2.8% 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% in 2020 and OECD unemployment to climb to 9.2% from 5.4% in 2019.”
Europe will be hit particularly hard, with eurozone GDP plunging by 11.5% if a second wave hits and by more than 9% if that is avoided.
In the US, GDP would take a hit of 8.5% and 7.3% respectively, and Japan 7.3% and 6%.
Emerging economies such as Brazil, Russia and South Africa face particular challenges of strained health systems, adding to difficulties caused by the collapse in commodity prices, while GDP in China and India would be relatively less affected.
The OECD unemployment rate would rise to 10% in a ‘double-hit’ scenario. Even in the organisation’s ‘single-hit’ forecast, five years of income growth would be lost across the economy by next year with a slow recovery.
"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," the organisation said.
OECD Chief Economist Laurence Boone said that restarting economic activity while avoiding a second outbreak would require flexible and agile policymaking.
“Extraordinary policies will be needed to walk the tightrope towards recovery.”
Boone added: “Governments must seize this opportunity to build a fairer economy, making competition and regulation smarter, modernising taxes, government spending and social protection.”
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