(Casey Harper, The Center Square) – A major international economic forecasting group has now lowered its optimism about a U.S. rebound from the COVID-19 pandemic.
The Organisation for Economic Cooperation and Development (OECD) Tuesday released its Economic Outlook, a “twice-yearly analysis of the major global economic trends and prospects for the next two years.”
Globally, the group projected that the worlds’ Gross Domestic Product (GDP) would grow 5.7% this year and 4.5% in 2022.
“Economic growth has picked up this year, helped by strong policy support, the deployment of effective vaccines and the resumption of many economic activities,” the report said.
However, the OECD significantly lowered growth predictions for the U.S., nearly a full percentage point, from 6.9% to 6% for 2021.
The Delta variant is one reason for the decrease, though other economic factors come into play.
The report points out that U.S. employment remains well below pre-pandemic levels.
“The recovery remains very uneven, with strikingly different outcomes across countries, sectors and demographic groups in terms of output and employment… leaving countries facing different policy challenges,” the report said. “In some countries where output has returned to pre-pandemic levels, such as the United States, employment remains lower than before the pandemic. In others, particularly in Europe, employment has been largely preserved, but output and total hours worked have not yet recovered fully. Rapid rebounds in activity have occurred in a few emerging-market economies, but in some cases this has been accompanied by high inflation pressures.”
A leading cause of concern is inflation, which has risen the most in decades in the last 12 months.
“Inflation has risen sharply in the United States, Canada, the United Kingdom and some emerging-market economies, but remains relatively low in many other advanced economies, particularly in Europe and Asia,” the report said. “G20 consumer price inflation is projected to moderate from 4½ per cent at the end of 2021 to around 3½ per cent by the end of 2022, remaining above the rates seen prior to the pandemic. Supply pressures should fade gradually, wage growth remains moderate and inflation expectations are still anchored, but near-term risks are on the upside.
“Accommodative monetary policy should be maintained, but clear guidance is needed about the horizon and extent to which any inflation overshooting will be tolerated, and the planned timing and sequencing of eventual moves towards monetary policy normalisation,” the group added.
Overall, the OECD said the global economic future remains unclear.
“Sizeable uncertainty remains,” the report said. “Faster progress in vaccine deployment, or a sharper rundown of household savings would enhance demand and lower unemployment but also potentially push up near-term inflationary pressures. Slow progress in vaccine rollout and the continued spread of new virus mutations would result in a weaker recovery and larger job losses.”