The damage to the global economy this year will be less than previously expected, but still “unprecedented”, a leading international body says.
The Organisation for Economic Cooperation and Development now predicts a decline of 4.5% in 2020, versus the 6% drop forecast in June.
It means it no longer expects the UK to have the deepest contraction of the major G20 economies this year.
But the 10.1% drop would still make Britain one of the hardest hit.
The revision for 2020 is favourable, but even so, the global economy is facing damage that the OECD describes as “unprecedented in recent history”.
The agency’s chief economist Laurence Boone said “there is no way to sugar coat it”.
It may be “less bad than we expected” she said, “but it is not a good outcome”.
For this year, the new forecast for Britain is a contraction that is less severe by 1.4 percentage points. In the OECD’s previous forecasts, published in June, it gave two scenarios for how the pandemic might unfold.
For what it called the single hit scenario, the economic decline for the UK was 11.5%, the biggest hit of any country covered by that forecast.
The new revised figures predict several countries, including Italy, India and South Africa will experience contractions larger than the UK’s.
The report says that the declines would have been substantially larger had it not been for what it calls the “prompt and effective policy support introduced in all economies”.
Weaker rebound in 2021
It says the support needs to be continued next year and governments should avoid “premature budgetary tightening at a time when economies are still fragile.”
Consumer spending on durable goods, including cars, has rebounded quite strongly the OECD says. But it has been subdued for services which involve social interaction or international travel.
For next year, the OECD is now predicting a slightly weaker rebound for the global economy.
For Britain the downward revision is relatively large, with growth now predicted at 7.6%, leaving the economy still smaller than it was in 2019. The 2020 forecast reflects an assumption that the UK and the EU will agree a basic free trade agreement.
For the global economy, the agency’s chief economist said that the loss of economic activity due to the pandemic by the end of 2021 would be equivalent to the combined annual gross domestic product of France and Germany.