Global Economy: In the ‘nets’ of Omicron

“Moderately optimistic” is the OECD in the economic forecasts for this year and next year. Of course, everything will depend on the new mutation for the change of the economy.

The global economy will grow by 5.6% this year, as the pandemic is now better controlled than last year and in most countries it is framed by a monetary and fiscal policy that supports the economy. The forecast comes from the Organization for Economic Co-operation and Development (OECD), an organization with 38 mainly affluent countries based in Paris. Compared to the last forecast in September, it reduced its estimates by 0.1 percentage points this year. The OECD forecast is lower than the 5.9% forecast forecast by the IMF for next year ‘s economic outlook and published last October. For the year, the OECD starts from growth around 4.5% which in 2023 will fall to 3.2%.

Predictions before Omicron

However, the International Economic Organization regrets the very low vaccination rates in many countries that have a negative impact on the world economy. “What has not been possible to ensure a rapid and effective vaccination of the population around the world has a high cost,” said an economic forecast released on Wednesday, December 1, in Paris and Berlin. It should be noted that the OECD calculated the economic prospects before the spread of the ‘Micron’ variant. It is not yet clear what the consequences will be, but the only thing that is certain is that the number of cases in Germany and some other European countries has already reached new record levels before it appeared. It is therefore natural for the authors of the OECD report to make their reservations with caution. And as they note “the rise in Covid-19 cases and continuing supply shortages in key sectors of the economy could slow the economic recovery.” Which means that the figures just published will soon have to be revised downwards.

For Germany, the OECD expects growth of 2.9% for this year, 4.1% for next year and 2.4% for 2023. The recovery will be reduced due to problems with the supply of many components, such as semiconductors for the needs of the automotive industry. “Given the long delays in orders, however, there could be a strong recovery if supply shortages subside,” the report said. Experts also expect that private consumption and corporate investment will increase, mainly due to the maintenance of low interest rates. With inflation in Germany at an all-time high of 5.2%, the OECD expects some easing next year, but does not believe inflation will soon reach 2%, as the European Central Bank (ECB) wants.

Pay attention to the lessons of the pandemic

Overall, the OECD finds that the economic performance of most of its member states has exceeded that of 2019, ie before the start of the pandemic.

At the same time, the Agency warns of growing inequalities, noting that “lower-income countries, especially those with lower vaccination rates, are at risk of falling behind.” Growing inequalities are also recorded within OECD countries. As far as Germany is concerned, the observation coincides with the analysis of the Bertelsmann Foundation published on Wednesday, 01.12. The middle class has shrunk, the risk of poverty is increasing. Between 1995 and 2018 the middle class share in the German population decreased by 6 percentage points reaching 64%. On the contrary, the chances of people going up to the middle class in 4 years have decreased by more than 10 percentage points and reaching about 30%. Compared to the other 23 OECD countries, the middle class in Germany has shrunk considerably. Only in Sweden, Finland and Luxembourg was the contraction even greater.

In its economic outlook, the OECD warns its members not to ignore important lessons from the pandemic. These include the reform of national health systems and better coordination in the distribution of medicines. States also do very little to help young people who, due to the closure of schools, find themselves at a disadvantage in their education and entry into professional life. Finally, public finances also need to be reviewed. The aid and financial stimulus programs during the pandemic were right. “But now we have to focus again on the future,” the report said. What researchers call “worrying”, however, is the fact that very little is being done in the fight against climate change. There is a lot of discussion going on here and not enough measures have been taken, according to the report.

Andreas Becker

Edited by: Irini Anastassopoulou

Source: Deutsche Welle