Warning to governments: OECD warns against stalling the upswing

Advertisements

As a result of the corona pandemic, the OECD has noted the most dramatic economic downturn since the Second World War. Now politicians must counteract this. Previous mistakes should not be repeated.

The OECD is urging industrialized governments not to take the breath away from economic recovery too soon. "We are living through an acute health crisis and the most dramatic economic downturn since World War II," said OECD chief economist Laurence Boone. "There is still no end in sight, but politicians can do a lot to build trust now."

Advertisements

Governments must avoid the mistake of tightening fiscal policy too quickly, as happened after the last financial crisis. "Without continued support, bankruptcies and unemployment could rise faster than necessary and put a strain on people's livelihoods for years," warned Boone. For this year, the Organization for Economic Cooperation and Development (OECD) expects global economic output to decline by 4.5 percent. But next year it should increase again by five percent.

Meanwhile, the German economy is coming through the corona crisis comparatively well, according to a forecast by the OECD. The gross domestic product is likely to collapse by 5.4 percent this year, according to the interim report. In June, the industrial nations organization had assumed minus 6.6 percent. For comparison: In France (-9.5 percent), Italy (-10.5) and the euro zone as a whole (-7.9) the economy is likely to contract more strongly, as is the UK (-10.1) and Japan (- 5.8). In the USA, on the other hand, the decline is likely to be milder at 3.8 percent. China is even expected to grow by 1.8 percent.

"The slump in spring was less severe than initially expected, the recovery in summer is quite strong," said the head of the OECD Berlin Center, Nicola Brandt, on developments in Germany. "The companies' business expectations are surprisingly good, and incoming orders are rising again." In addition, the number of infections is lower than elsewhere. As a result, the measures to contain Corona were not so strong. "So the economic uncertainty is not quite as high as in many other countries," said Brandt. "In addition: Germany is less dependent on tourism than France, Italy and Spain, for example."

Since the recession is likely to be weaker this year than assumed, the countermovement in 2021 is also unlikely to be as strong. For Germany, the OECD then expects growth of 4.6 percent. In June it had assumed 5.8 percent.

In its autumn forecast, the Halle Institute for Economic Research (IWH) predicts growth of only 3.2 percent for the coming year, while it expects a decline of 5.7 percent for 2020. "The German gross domestic product fell significantly more in the first half of 2020 than during the financial crisis in the winter of 2008/2009," said IWH Vice President Oliver Holtemöller. "Meanwhile the economy is on the way to a new normal."

. (tagsToTranslate) Economy (t) Corona crisis (t) OECD (t) Economic forecasts (t) GDP (t) Economic outlook (t) Economic growth (t) Economic crisis