The global economic outlook has brightened as vaccine rollouts gain speed and the United States launches a vast new stimulus package, the OECD said on Tuesday, hiking its forecasts.
The world economy is set to rebound this year with 5.6% growth and expand 4.0% next year, the Organisation for Economic Cooperation and Development said in its interim economic outlook.
That marked a sharp increase from its last outlook in early December, when the Paris-based policy forum forecast global growth of 4.2% this year and 3.7% next year.
But important risks loomed over the improved outlook, notably in the form of how fast authorities get vaccine shots to people, how soon restrictions are lifted and whether new variants are kept in check.
“The top policy priority is to ensure that all resources necessary are used to produce and fully deploy vaccinations as quickly as possible,” the OECD said in the report.
Global gross domestic product was seen returning to pre-pandemic levels by the middle of this year, albeit with large divergences between countries.
While the vaccine rollout would give a shot in the arm to the global economy, the United States’ planned $1.9 trillion stimulus package would cascade down to other countries, adding more than a percentage point to global growth.
The U.S. economy would grow 6.5% this year and 4.0% next year, the OECD said, ramping up its forecasts from expectations in December for 3.2% in 2021 and 3.5% in 2022.
The OECD estimated the package, which includes $400 billion in one-time payments of $1,400 to many Americans, would boost U.S. output by around 3-4% on average in its first full year.
With public money flooding into the world’s biggest economy, the package could lead to the creation of up to three million U.S. jobs by the end of the year but could also increase inflation by 0.75 percentage points per year on average in the first two years.
Meanwhile, the stimulus would be a boon for the United States major trading partners, boosting growth by 0.5-1 percentage point in Canada and Mexico, and between 0.25-0.5 in euro area and China, the OECD said.