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OECD projects global GDP will collapse by 4.5% this year

Posters in the window and a closure store announce a “Stock Liquidation” in Manchester, the North of England on August 12, 2020.

Paul Ellis | AFP | Getty Images

The global economy has performed better than expected, but it is still on track for an “unprecedented”

; decline in production, the Organization for Economic Co-operation and Development warned on Wednesday.

In its latest economic outlook, the OECD said the world economy will contract by 4.5% this year – an uptick from an estimate made in June that pointed to a 6% drop in gross domestic product (GDP).

“The decline in global production in 2020 is smaller than expected, although it is still unprecedented in recent history,” the OECD said in its report.

Going forward, the OECD expects the global economy to grow by 5% by 2021. Nevertheless, the outlook is “unusually uncertain” due to the coronavirus pandemic.

Critically affected sectors, such as the travel and tourism industries, have not fully recovered from the strict lockdown measures introduced earlier this year. Many countries are struggling with a resurgence in the number of infections. As a result, governments may impose new restrictions in the coming weeks to contain new waves – which will add further pressure on the global economy.

“Output rose rapidly after easing containment and the initial reopening of enterprises, but the pace of global recovery has lost some momentum in the summer months,” the OECD said.

The Paris-based institution, an intergovernmental body designed to stimulate economic development, also warned of “significant differences” between countries.

China, the United States and the eurozone are expected to perform better than originally expected in June. By comparison, growth expectations for India, Mexico and South Africa have deteriorated.

China is expected to grow by 1.8% by 2020 – the only country among OECD estimates expected to experience growth.

In contrast, the US economy is expected to contract by 3.8% and the euro area by 7.9%.

The picture is even sadder for India, Argentina, Britain, South Africa and Mexico, all of which are expected to collapse by more than 10%.

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