OECD Economic Outlook, 1 December 2021

 

Good morning,

Welcome to today’s launch of the OECD Economic Outlook, together with our Chief Economist Laurence Boone.

Laurence will present our detailed projections, but let me outline for you what we see as the pressing macroeconomic challenges today.

The global recovery continues to progress.

GDP in most OECD countries is now close to the pre-pandemic path.

Massive fiscal and monetary policy support for households and firms from the outset of the crisis, the relatively rapid development of vaccines, the accelerating digital transformation in the wake of the pandemic, have all helped get us here.

But the growth momentum is slowing and disparities in the recovery remain.

Not every country, industry or community is recovering at the same pace.

Tackling the COVID-19 pandemic around the world remains our most urgent priority.

Whilst the threat of infection remains high, we remain vulnerable.

Which is why we must continue to be vigilant in responding to any new infection outbreaks, which can undermine the recovery both globally and regionally.

We see this risk here in Europe, where a new wave of infections has been sweeping through the Continent and where the rollout of vaccinations, very strong in many parts, has been too low in others.

Global vaccination rates, in aggregate, have increased substantially over the last six months.

Today, about 42% of the world is fully vaccinated compared to just 5% or thereabouts in May.

But the vaccination coverage remains too uneven – in particular across developing countries, but also across parts of Europe.

We need to continue to pursue an all-out effort to reach the entire world population with vaccines as quickly as possible.

No country is properly protected until every country is more properly protected.

The recent emergence of the new Omicron variant provides us with yet another stark reminder of that fact.

The lags in vaccination rates are also contributing to a supply crisis, which is disrupting the global economy.

How did we get here?

Prior to the pandemic, global supply chains were operating smoothly, even if some risks were looming, for example due to underinvestment or heavy concentration of some supply chain components.

When the impact of COVID-19 started to hit in early 2020, economies slowed to restrict the spread of the virus, creating millions of small interruptions.

Restrictions and quarantine requirements brought down demand and production.

Once economies started to reopen, demand rebounded strongly.

Resurging demand faced severe supply disruptions.

World merchandise trade and retail sales are already above their 2019 levels and oil demand is close to its pre-pandemic level.

But supply bottlenecks persist, triggered by labour shortages, intermittent plant closures and shipping delays.

These disruptions directly affect the availability and the prices of everyday goods.

Global food prices, for example, have continued to climb, hitting a 10-year high this October.

These high food prices are felt by everyone, but especially by low-income households who spend a larger share of their income on food.

The supply of electronic goods, everyday appliances and vehicles has also been affected, with a global semi-conductor chip shortage delaying production.

Disruptions have also increased the cost of energy.

Restrictions on the transportation and supply of oil and gas combined with weather-related events draining inventories, have added upward pressure on global energy prices.

Geopolitical tensions are high as economies across the globe are searching for reliable, predictable and more environmentally sustainable sources of energy.

While we expect inflationary pressures to start fading in the New Year, we must not forget that it will be the consumer who bears the cost if shortages persist and prices remain high.

Policymakers will need to continue to address health, supply and energy challenges to optimise the strength and the quality of the global recovery across countries, sectors, firms and households.