O E C D Economic Outlook

 The Organisation for Economic Co operation and Development (OECD) is an inter governmental  organisation founded in 1961with 38 members working to build prosperity, equality of opportunity and wellbeing for all.According to OECD's ECONOMIC OUTLOOK  December 2021- " The global recovery continues to progress but has lost momentum and is becoming increasingly imbalanced. Parts of the global economy is rebounding quickly but others are at risk of being left behind, particularly less income countries where vaccination rates are low and firms and employees in contact intensive sectors where demand has yet to recover fully . Momentum from strong rebound after reopening is now easing in many countries amidst persisting supply bottlenecks,rising import costs and continued effects of the pandemic. Stronger and longer lasting inflation pressures have emerged in all economies at unusually early stage of the cycle and labour shortages are appearing even though employment and hours worked are still yet recover fully. Food and energy costs have risen sharply with the strongest impacts on low income households as well as prices on durable good sectors where supply bottlenecks are most concentrated, makes out more uncertain  and raise considerable policy challenges ".

  Outlook observed that as patterns of demand normalise, production capability expands and more people return to labour force, supply side constraints and shortages should disappear gradually in 2022-23. The global recovery is projected to continue but with global GDP growth moderating over time from the annual average of  3.3% during 2013 -19 period to -3.4% contraction in 2020,5.6% in 2021 to 4.5% in 2022 and 3.25%  in 2023.Most advanced economies are projected to return to their pre pandemic output path by 2023.G 20 group which has grown on an average annual rate of 3.5% during 2013-19 recorded  -3.1% contraction in 2020,5.9%  in 2021and projected to grow 4.7% in 2022 and 3.3% in 2023.OECD countries which grew at average 2.2% in 2013 -19 witnessed negative growth of  -4.7% in 2020 followed by projected 5.3%  in 2021,3.97% in 2022 and 2.5% in 2023.While USA recorded 2.4 % annual average GDP growth for 2013-19 and contraction of- 3.4% in 2020,5.5% in 2021,3.1% in 2022 and 2.4%in 2023, Euro area recorded only 1.9% growth in 2013-19 followed by contraction of-6.5% in 2020,5.2% in 2021,4.3% in 2022 and 2.5% in 2023. Non OECD countries registered 4.3 % growth in 2013-19 followed by a contraction of-2.2% in 2020,5.8% in 2021,4.9 % in 2022 and 3.8% in 2023.Lower growth was recorded by Japan 0.8% in 2013-19,-4.6% contraction in 2020,1.8 % in 2021,3.4% in 2022 and 1.1% in 2023.Both China and India recorded the same average annual growth rate of 6.8% during the period of 2013-19. But during 2020 China was the only country to achieve positive growth rate of 2.3% as against India's negative growth rate of-7.3%.For 2021 India is projected to grow 9.4% as against China's 8.1% Similarly in 2022 India is projected to grow 8.1%  China 5.1%, and for 2023 India  5.5% and  China 5.1% respectively.  

 Impact of supply side bottlenecks especially in automobile sector is disrupting growth. Supply bottlenecks and labour shortages are checking the momentum of recovery resulting rise in energy prices. Rising energy costs have hurt  households purchasing power and felt rise in inflation expectations. Consumer price inflation rate is projected to peak by the end of 2021 and then moderate towards lower levels consistent with underlying pressures from slowly rising labour costs and declining spare capacity around many economies. CPI inflation is projected to fall to 3.5% by the end of 2022 from nearly 5% at the end of 2021and projected 3% in 2023.Employment and work participation rate are projected to pick up gradually through 2022-23 though to a different extent across countries with OECD'S unemployment is falling to around 5% below pre pandemic levels. 

 According to the report financial market conditions generally remain favourable. It suggested following policy measures to speed up recovery. Raise the quality of investment for a more sustainable recovery.Now is the time for detailed plans for public finances and for ensuring climate transition and digitalisation.Rebalance composition of public spending and increase public investments and policy certainty to strengthen the recovery, encourage private investment ease the supply of good and build for the future. Boost skills to ensure recovery for all. Enhanced reforms are needed to improve job opportunities, alleviate skill shortages and restore business dynamism.

It may be noted here that significant risks remain to achieve these targets. First and foremost WHO warns of Covid19 " tsunami "overwhelming health systems after twin threats from Delta and Omicron variants were detected. Twin threats that were driving new case numbers to record high leading to spike in hospitalisation and deaths. Pressures on health systems was not only due to new Corona virus patients but also large number of health workers falling ill.WHO wanted 40% of the population in every country fully vaccinated by the end of 2021and has a target of 70%  coverage by the middle of 2022 which is difficult to achieve. If problems in real estate sector and with power supply persist or intensify in China it will have adverse effects on other economies particularly commodity exporters.Persistent supply pressures than anticipated or a stronger and sustained surge in energy costs is likely to upset projections. 

In short ,measures like increased public spending, faster vaccine deployment, substantial unwinding of household savings and corporate cash holdings accumulated during the pandemic would boost spending and productive capacity and enhance the pace of recovery.