Here is the good news – the coronavirus crash won't be as bad as thought back in June. The bad news? The recovery will be at a crawl, plus the looming second wave of the virus could set things back further, halving global growth next year.
"Every G20 country except one is negative this year. There have never been such global downturns, all countries are plunging together," said Laurence Boone, chief economist at the Organisation for Economic Cooperation and Development (OECD).
"In our projections, if we look towards 2021, growth rates look good, they are positive, they're larger than we have seen for a while. But in reality, what that means is that GDP in many countries at the end of 2021 will still be below the level [they were] at the end of 2019 – and well below what was expected prior to the pandemic," she said.
The Paris-based think tank crunched the numbers in its quarterly outlook and predicts the global economy is set to shrink 4.5 percent in 2020, which is not as bad as the 6 percent collapse it had forecast in June. Growth next year is forecast to be 5 percent. However, if there is a major second or further wave of the virus, or if countries have to go back into national lockdowns, growth might shrink a further 2 to 3 percent.
The OECD said the only major country to post positive economic growth this year will be China. Growth was revised up 1.8 percent from June's forecast of a 2.6 percent contraction.
The UK's growth forecast was revised upwards by 1.4 percentage points, but at minus 10 percent this year, teh country faces one of the biggest falls in economic output out of the G20 grouping of richest nations.
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"There has not been such an economic activity contraction since the World War II," Boone said.
"Given some activity, we remain hampered by the constraint on social relationships, physical distancing – it takes some time to recover. And by end 2021, we are roughly back to the 2019 income level," she said. "What does that mean? That means that roughly we will have lost 7 trillion dollars. That's the combined annual GDP of France and Germany."
That long-term economic cost of COVID-19 works out at around $900 for every person on the planet – a vast shortfall in income the world would have been generating if the coronavirus had not brought the world economy to a virtual standstill.
Any recovery, when it comes, will be uneven across countries, depending on a variety of factors including the likelihood of new virus outbreaks, the impact on consumer and business confidence and the extent to which government aid for jobs and businesses can boost demand.
"Everything needs to be done to strengthen confidence – that's really, really key to the recovery and to make it faster and larger," said Boone.
"And strengthening confidence, I think, has two elements: the first one is to give a clear direction of travel and the second one is to really help people and firms to actually move forward," she added.
"We know we cannot withdraw fiscal support too early."
"Policymakers have the opportunity of a lifetime to implement truly sustainable recovery plans that reboot the economy and generate investment in the digital upgrades much needed by small and medium-sized companies, as well as in green infrastructure, transport and housing to build back a better and greener economy," she said.
The OECD said the outlook will change if the threat from the coronavirus fades more quickly than expected – in which case, improved confidence could significantly boost global activity in 2021.
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