OECD predicted deepest recession in 100 years
The coronavirus pandemic is heading for the biggest recession in 100 years (excluding wartime), the Organization for Economic Cooperation and Development warned on Wednesday.
Isolation regime and travel restrictions imposed by countries around the world have led to a sharp decline in consumer activity. Global supply chains have been disrupted, debt has risen and business confidence has declined.
«The economic consequences are dire in all areas. Recovery will be slow, and the effects of the crisis will be felt for a very long time», – summarized the OECD in its economic forecast.
Lawrence Boone, chief economist at the OECD, said CNBC that the current uncertainty is very high, but the organization expects growth in economic activity in the coming months.
«We will see an upturn that looks like a V-shaped recovery as the world is in the process of implementing indulgences and some sectors reopening and starting work», – Boone said. The so-called «V-shaped» recovery means a sharp decline in economic activity, which is then followed by a sharp recovery.
The OECD has released two global growth forecasts. The first suggests a second wave of the pandemic Covid-19, the second assumes that waves can be avoided.
The OECD said global growth will contract by 7.6% in 2020 and «will remain weak enough» compared to pre-crisis levels by the end of next year. If there is no second wave, the global economy will still contract by 6% in 2020, but will recover almost completely by the end of 2021..
The organization believes that by the end of 2021, income losses will exceed any previous recessions in the past 100 years (excluding wartime), with dire and long-term consequences for people, businesses and governments..
France, UK, Spain and Italy are expected to experience the worst economic downturns this year. These countries are among the worst hit by the health crisis to date.
OECD also warned of the impact of the pandemic on youth. Persons between the ages of 15 and 24 make up the largest share of the employed in the most affected sectors such as tourism and restaurant business.
«Unemployment this year will be at its highest level in twenty-five years and will begin to decline only in 2021», – the forecast says.
In addition, emerging market economies are also expected to be hit hard.. For example, Brazil and Argentina, which rely on demand from developed countries, which are also experiencing difficulties.
«Commodity producers with limited financial buffers and low-income countries, as well as underdeveloped domestic financial markets and a small domestic investor base», – added to the OECD.