Uneven Global Vaccination Threatens Economic Rebound, O.E.C.D. Warns
PARIS — A global recovery from the pandemic is finally taking hold as rising vaccination rates in advanced economies allow governments to keep …
PARIS — A global recovery from the pandemic is finally taking hold as rising vaccination rates in advanced economies allow governments to keep businesses open and people to resume leading largely normal lives, the Organization for Economic Cooperation and Development said on Tuesday.
But the spread of the Delta variant of the coronavirus has blunted some of the momentum, leading the organization to inch back its forecast for worldwide growth and warn of a greater economic fracturing between wealthy nations and the developing world, driven by starkly unequal access to vaccines.
Countries that have had the financial firepower to secure vaccines and immunize citizens are bouncing back much faster than those that are still struggling to obtain shots, the organization said, raising a host of related economic problems that are affecting global supply chains and pose a risk for the future.
“The global shock that pushed the world to the worst recession in a century is now fading, and we’re now projecting the recovery will bring growth back to its pre-crisis trend,” Laurence Boone, the organization’s chief economist, said in a news briefing.
But “a failure to vaccinate globally puts all of us at risk,” she said.
The global economy has managed to build on a recovery that started earlier this year as governments ramped up immunization campaigns in a bid to avoid debilitating new shutdowns even as the Delta variant spread.
Huge fiscal programs, including an enormous stimulus package in the United States and a parallel effort in Europe, has unleashed pent-up business activity, while consumers who saved during lockdowns started spending again.
But the spread of the Delta variant still blunted activity in a variety of ways around the world, including by gumming up supply chains in countries where new lockdowns were unavoidable because a relative lack of vaccine, the O.E.C.D. said.
As a result, the organization, which is based in Paris, trimmed its 2021 outlook for global growth to 5.7 percent from a 5.8 percent forecast in May. The O.E.C.D. also edged down forecasts for the U.S. economy and emerging markets, but raised its outlook for Europe.
The United States, the world’s largest economy, has helped usher along the global recovery, the organization said, aided by a $2 trillion infrastructure package that sped a post-pandemic rebound.
But the recovery remains far from normal, as some businesses thrive and others lag behind. And a jump in inflation unleashed since spring tied to a resurgence of consumer demand, sharp surges in oil prices and an explosion in the cost of shipping goods to businesses and consumers worldwide is expected to weigh on growth, the organization said.
United States economic output will expand 6 percent this year, less than a breakneck 6.9 percent pace forecast in May but still well above that of most other countries except China and India, the organization said.
Investors are worried that the Federal Reserve may soon begin cutting back its huge purchases of government bonds, which has helped fuel the recovery that has driven Wall Street to record highs since the pandemic hit.
The Fed winds up a two-day policy meeting on Wednesday and investors will look for signs of any shift. The Fed chair, Jerome H. Powell, has said he expects higher-than-normal inflation to be temporary, and that it is probably linked to pandemic-related quirks. The O.E.C.D. joined most economists in agreeing that prices would probably rise more slowly through the end of the year and would eventually wane, but said it was unclear how much and how fast the increases would fall away.
“We expect the effects to fade eventually, but the extent of price pressures differs widely across countries, pointing to the fact that this is no ordinary global recovery,” Ms. Boone said. Central banks should keep monetary policy loose, but offer clearer guidance about how much they can tolerate the increase in inflation, she added.
The eurozone, by contrast, was on track to perform better than expected, with growth forecast at 5.3 percent, up from a previous 4.3 percent estimate. Growth in Germany, Europe’s largest economy, is cooling, the organization said, but the impact was expected to be offset by faster-than-expected rebounds in France, Italy and Spain, where governments spent hundreds of billions of euros shielding businesses and citizens from the worst affects of the pandemic.
Growth across most countries is likely to taper off next year after an extraordinary rebound from the recession, with the global economy expected to expand at a 4.5 percent pace and the United States growing at 3.9 percent. Europe’s economy will also cool, to a forecast of 4.6 percent.
China, the world’s second biggest economy, was forecast to grow 8.5 percent this year, before slowing to a 5.8 percent pace in 2022. Asked about the impact from the potential collapse of the debt-riddled property giant Evergrande, Ms. Boone said the agency expected China to cope with any fallout.
And despite a terrible outbreak of the Delta variant in India earlier this year, the economy was expected to remain largely on track with 9.7 percent growth, before cooling to 7.9 percent next year.
By contrast, countries with lower vaccination rates sharply lagged others, the organization said. In Indonesia, which has vaccinated just 16 percent of the population, the economy was expected to grow 3.7 percent, one of the slowest rates among O.E.C.D. countries. Russia, with immunization rates around 30 percent, will grow at a slower-than-expected 2.7 percent pace.
But the robust numbers within the richest economies masked lingering troubles, with the recovery benefiting people unevenly.
Growth in the United States returned to prepandemic levels, but employment remains lower than before the economic restrictions. In Europe, which deployed billions to shield its businesses and workers from mass unemployment and bankruptcies at the height of the crisis, employment has been largely preserved.
And the virus and lagging vaccination rates continue to throw a wrench into the smooth functioning of the global economy, snarling supply chains, the O.E.C.D. said.
“There are some parts that haven’t left factories in countries with virus outbreaks,” Ms. Boone said. As a result, numerous companies are running out of inventory and slowing production, which in turn is pushing prices higher for a range of goods, but the surge should fade once supply chain bottlenecks fade.
Inflation will ease quicker from the current alarming levels if vaccination programs speed up.
“If we continue to vaccinate and adapt better to living with the virus, supply will begin to normalize and this pressure will fade,” Ms. Boone said. “But for that, we have to vaccinate more people.”