June 10 (UPI) — The economic fallout of the coronavirus could cause the world’s gross domestic product to sink 7.6 percent this year, an international economic organization warned Wednesday.
The Organization for Economic Co-operation and Development said in its latest economic outlook that the COVID-19 pandemic has triggered “the most severe recession in nearly a century” through governments implementing lockdowns that shuttered businesses the world over.
Though many countries have moved to ease lockdown restrictions as coronavirus cases slow, the OECD warned that the economic outlook remains “highly uncertain” and a second wave of cases could force the global GDP to dive nearly 8 percent this year.
“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,” the outlook said in a summary of the report. “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.”
Even if there isn’t a second wave, global GDP is still expected to fall 6 percent with unemployment in wealthy countries to reach 9.2 percent from 5.4 percent last year, it said.
“Living standards fall less sharply than with a second wave but five years of income growth is lost across the economy by 2021,” the outlook report said.
The outlook said Europe’s GDP hit is “particularly harsh,” plunging some 11.5 percent if a second wave hits and 9 percent if the sole peak is all that happens this year.
In the United States, GDP is forecast to fall 8.5 percent in the second-wave scenario and 7.3 percent in the single-wave case, it said.
Meanwhile, in China where the virus emerged late last year before spreading around the world, its GPD will be relatively less affected taking a 3.7 percent hit or a 2.6 percent drop, depending on if there is either one or two waves of infections.
“How governments act today will shape the post-COVID world for years to come,” OECD Secretary-General Angel Gurria said in a statement. “This is true not only domestically, where the right policies can foster a resilient, inclusive and sustainable recovery, but also in terms of how countries cooperate to tackle global challenges together.”
International cooperation has been “a weak point” so far in terms of a policy response to the pandemic, but it can create confidence and have important knock-on effects, he said.
To weather the economic impacts of the pandemic, the organization is calling for supply chains to be more resilient by maintaining larger holdings of stock and diversify their sources both locally and internationally along with fostering stronger international cooperation.
“Governments must seize this opportunity to build a fairer economy, making competition and regulation smarter, modernizing taxes, government spending and social protection,” OECD Chief Economist Laurence Boone said. “Prosperity comes from dialogue and cooperation. This holds true at the national and global level.”