OECD Upgrades Global Growth Forecast Amid US Stimulus Package Approval

Strategic Insights -

The Organisation for Economic Co-operation and Development (OECD) has upgraded its forecast for global growth, expecting the economy to expand 5.6% this year, a 1.4 percentage point upgrade from its November forecast. This improvement is mainly due to the rapid rollout of Covid-19 vaccination programs and the increase in US stimulus spending, including the $1.9tn US stimulus package passed by the US Senate.

The OECD's chief economist, Laurence Boone, attributed the upgrade to the stimulus bill, stating that it will add about 1 percentage point to global economic growth in 2021. As a result, the US is expected to grow at a rate of 6.5% this year, an upgrade from the 3.2% forecast in November. The OECD also revised upwards its forecast for Canada and Mexico, expecting their growth to be boosted by about 1 percentage point each, while Europe is expected to see a more modest boost of around 0.5 percentage points.

Key Takeaways:

  • The OECD has upgraded its forecast for global growth to 5.6% this year, a 1.4 percentage point upgrade from its November forecast.
  • The US stimulus package is expected to add about 1 percentage point to global economic growth in 2021.
  • The US is expected to grow at a rate of 6.5% this year, an upgrade from the 3.2% forecast in November.
  • Canada and Mexico are expected to see their growth boosted by about 1 percentage point each.
  • Europe is expected to see a more modest boost of around 0.5 percentage points.
  • The OECD has also revised upwards its forecast for the UK, expecting its growth to be 0.9 and 0.6 percentage points higher than previously forecast for 2021 and 2022 respectively.
  • The US stimulus package is expected to increase domestic inflation, but not to a dangerous level.
  • Emerging economies are expected to fare less well, remaining 3-4% below their pre-virus output path by the end of next year.

Statistics:

  • 5.6%: Global economic growth forecast this year.
  • 1.4 percentage points: Upgrade from the OECD's November forecast for global growth.
  • 6.5%: Expected US growth rate this year.
  • 3.2%: Previous forecast for US growth.
  • 1 percentage point: Expected increase in global economic growth in 2021 due to the US stimulus package.
  • 0.9 and 0.6 percentage points: UK growth forecast revised upwards for 2021 and 2022 respectively.
  • 3-4%: Expected output gap for emerging economies by the end of next year.

Sources:

  • "OECD Upgrades Global Growth Forecast Amid US Stimulus Package Approval" by Chris Giles and Adam Samson, Financial Times.
  • Organisation for Economic Co-operation and Development (OECD) press release.