A new COVID-related downturn would probably cause more severe unemployment in the United States, while in Europe growth would suffer more, the Organisation for Economic Cooperation and Development said Wednesday.
The prediction came as the organisation released its latest economic outlook, which reported a fast but uneven recovery from the disruption of the pandemic, emphasizing the stark imbalances in growth between advanced and less developed countries, as well as among the biggest industrial nations.
Differing policy choices were the primary reason distinguishing Europe from the United States, said Laurence Boone, the organisation’s chief economist.
“Europe has been focusing on protecting jobs throughout the crisis, and as a result employment is now already at its pre-crisis level,” she said.
By contrast, the United States has “largely focused on supporting households’ incomes rather than jobs,” she said, resulting in a quicker rebound in gross domestic product.
If the economy were to be walloped again, Boone said, “in Europe, it would be output that would be hurt more while in the US, it would be jobs that would take the hit.” At the start of the pandemic in 2020, Europe’s output fell much more sharply than in the United States.
Boone said that despite the new coronavirus variant, omicron, the economic outlook remains “cautiously optimistic.” Global growth this year is expected to come in at 5.6 percent before dropping to 4.5 percent next year and 3.2 percent in 2023, according to the report.
She did warn, however, that omicron adds to already high levels of uncertainty and could threaten the recovery.
The organisation also emphasized that whatever imbalances may exist among countries in North America and Europe, the starkest asymmetries are between advanced and emerging economies, where growth and vaccination rates are lagging far behind.
Boone noted that the Group of 20 countries have collectively spent $10 trillion in response to the virus, while a scant fraction of that amount has gone to providing vaccinations to poorer countries — even though such support is crucial to the global economy’s recovery.
The organisation’s latest forecast echoed concerns about prolonged inflation that were voiced Tuesday in Washington by Jerome Powell, the Federal Reserve chair.
Boone cautioned that the severity of the pandemic could play out in different ways. More disruptions in the supply chain could aggravate inflation, but a new wave of COVID-related restrictions could instead cut into demand and cause inflation to recede faster.
Rising prices on essentials like food would be particularly burdensome on the poor, the organisation said.
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