The Organization for Economic Cooperation and Development (OECD) says the global economic outlook is improving as vaccine rollouts allow businesses to resume operations and the U.S. pumps trillions of dollars into the world’s largest economy.
The global economy is forecast to grow 5.8% this year and 4.4% next year, according to the OECD, which raised its estimates from 5.6% and 4.0% in its last forecast released in March of this year.
The global economy has now returned to pre-pandemic activity levels but has not yet achieved the growth expected prior to the global pandemic, the OECD said in its latest Economic Outlook publication.
While vaccination campaigns were allowing advanced economies to reopen for business, many emerging market economies continue to be held back by slow vaccination deployments and new COVID-19 outbreaks, the OECD said.
Central banks in advanced economies should keep financial conditions relaxed and tolerate inflation overshooting their targets, the Paris, France-based agency said. Sizeable spare capacity in the global economy would help keep a sustained increase in inflation at bay despite recent price pressures triggered by supply chain bottlenecks as economies reopen.
Buoyed by a multi-trillion-dollar stimulus plan, the U.S. economy is forecast to grow 6.9% this year, the OECD said, up from a previous forecast of 6.5%. It is expected to expand 3.6% in 2022, down from a 4.0% forecast previously.
The U.S. stimulus plan is seen adding three to four percentage points to U.S growth and one percentage point to global growth while bringing the U.S. economy back to pre-crisis levels by mid-2021.
