OECD chief pessimistic over global economy

Global economists forecast negative growth and possible recession over the next two years due to the global coronavirus pandemic.

The OECD chief is pessimistic over global economy.

David Sapsted

23 March 2020

It is "wishful thinking" to believe that the global economy will bounce back quickly after the coronavirus pandemic has been overcome, according to the head of the Organisation for Economic Co-operation and Development (OECD).

An uncertain future for global economies

Angel Gurría, OECD secretary-general, told the BBC on Monday that the world would take years to recover from the pandemic, which he described as providing a bigger economic shock than the 2008 financial crisis.He also described recent economists' estimates that the virus would cause growth in the global economy to halve to 1.5 per cent this year as already looking too optimistic, adding that he expected to see major economies fall into recession.

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"Even if you don't get a worldwide recession, you're going to get either no growth or negative growth in many of the economies of the world, including some of the larger ones and, therefore, you're going to get not only low growth this year, but also it's going to take longer to pick up in the in the future," Mr Gurría said."And the reason is that we don't know how much it's going to take to fix the unemployment because we don't know how many people are going to end up unemployed. We also don't know how much it's going to take to fix the hundreds of thousands of small and medium enterprises who are already suffering."

UK economy in decline

Mr Gurría's comments coincided with the publication of KPMG's latest, quarterly Economic Outlook, which forecast a 2.6 per cent decline in the UK economy this year because of COVID-19 – and a 5.4 per cent decline if the pandemic persisted during the year. The report said that the economy would not recover until the second half of 2021.Yael Selfin, KPMG UK's chief economist, said, "The COVID-19 pandemic is first and foremost a human crisis. But there will also be a very substantial negative impact on the global economy and the UK's economic performance this year and potentially next, but the economy is expected to recover by the second half of 2021."Until we know how and when the COVID-19 outbreak will end, the scale of the negative economic impact will be difficult to quantify. However, it is now almost certain that the UK is slipping into its first significant downturn in over a decade."

Upcoming challenges for trade

The report said that, with more measures to support businesses, the disruption to economic activity in the first half of the year could see unemployment peak at around 5.6 per cent in May. KPMG predicts this will then ease gradually to around 4.1 per cent by the first quarter of 2021.Challenges for the UK and its trading partners include a drop in demand for consumer goods and services during the restrictions on social gatherings, supply chain disruption, workforce loss and workplace shutdown.However, KPMG said that low inflation will leave the Bank of England some room for monetary expansion to combat both turbulence in markets and the economic downturn, but with interest rates at a record low, more creative stimulus measures will need to be used.