Covid-19 economic crisis worst in living memory, OECD warns

By Rachael Burnett

Madrid Desk, Jun 10 (efe-epa).- Covid-19 is the worst health and economic crisis since World War Two, disproportionately affecting the most vulnerable people, the Organisation for Economic Co-operation and Development warned on Wednesday.

The coronavirus pandemic is a “global public health crisis without precedent in living memory” that has caused “widespread loss of life and severe human suffering”, the OECD said in its latest Economic Outlook.

Global GDP is estimated to have declined by around three percent in the first quarter of 2020, according to the organization.

“The global economy is experiencing the deepest recession since the Great Depression in the 1930s, with GDP declines of more than 20 percent in many countries during shutdowns and a surge in unemployment,” it added.

Lockdowns have hit the least qualified and young workers the worst and have exacerbated inequality, with those able to telework – and therefore keep their jobs – generally highly qualified.

Laurence Boone, OECD chief economist, said in a statement: “The spread of Covid-19 has shaken people’s lives around the globe in an extraordinary way, threatening health, disrupting economic activity, and hurting wellbeing and jobs.”

He warned that until a vaccine or treatment is developed, physical distancing and testing, tracking, tracing and isolating “will be the main instruments to fight the spread of the virus”.

Sectors affected by border closures and those requiring close personal contact, such as tourism, travel, entertainment, restaurants and accommodation “will not resume as before”, he added.

“By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments,” Boone said.

World trade has also contracted sharply, with the volume of goods and services estimated to have fallen by more than three percent in the first three months of 2020, according to the OECD.

Air traffic has been particularly hard hit, with international passenger traffic in April more than 98 percent lower than the previous year and international freight traffic down by almost 30 percent.

The OECD warned that the situation is “exceptionally uncertain” and based its projections on two scenarios, one where the outbreak is brought under control and another where a second wave erupts in 2020.

In the “single-hit” scenario the world’s GDP is projected to decline by six percent this year and will have almost regained the pre-crisis level at the end of 2021.

If a second outbreak occurs towards the end of this year, global GDP is projected to decline by 7.6 percent in 2020 and remain well short of its pre-crisis level at the end of next year.

“The crisis will cast a long shadow over the world and OECD economies,” the report warned.

“By 2021, it will have taken real income per capita in the majority of OECD economies back to 2013 levels in the double-hit scenario and to 2016 levels in the single-hit scenario.”

Activity has declined sharply in China, the initial center of the pandemic, and other Asian economies with close links to the country.

Output declined more sharply in the euro area than in the United States and Japan, “reflecting the earlier and more stringent shutdown measures implemented in many European economies and weak underlying growth momentum prior to the shutdowns”, the OECD reported.

Governments can provide safety nets to allow people and firms to adjust but will not be able to uphold private sector activity, employment and wages for a “prolonged period”, Boone warned.

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