The world economy was estimated to contract by 6% in 2020 in June but the figures have been revised to 4.5%. Strong recovery particularly in the US and China have led to the revision of the figures although any additional lockdown measures may slash the growth rate, macroeconomic influencers share their views on the COVID -19 impact.
EY ITEM Club’s chief economic adviser Howard Archer shared an article on the forecasts made by the Organisation for Economic Cooperation and Development (OECD) on the global economy. The OECD revised its earlier forecast of world economy contracting by 6% to 4.5% in 2020.
The organisation noted that the economy is recovering faster than previously anticipated due to improvement in outlooks in the US and China. If the pandemic is brought under control, the world economy may witness a growth of 5% in 2021, the OECD noted.
Any increase in infection cases and lockdown measures may lead to a decline in growth by 2%-3% from the 2021 forecast. The OECD forecast is based on the assumption that local outbreaks may continue and local restrictions are imposed rather than nationwide lockdowns.
New #OECD forecasts sees #GDP contracting 10.1% in #UK in 2020 then growing 7.6% in 2021. Other GDP forecasts include: #US (-3.8%; 4.0%), #Eurozone (-7.9%; 5.1%), #Germany (-5.4%; 4.6%), #France (-9.5%; 5.8%), #Italy (-10.5%; 5.4%) https://t.co/l27dOV2fy0
— Howard Archer (@HowardArcherUK) September 16, 2020
Linda Yueh, an economist at Oxford University, shared an article on the increase in redundancies in the UK labour market. According to data from the Office for National Statistics, the unemployment rate has increased to 4.1% for the three months to July and redundancies have increased by 48,000 compared to the previous quarter.
Younger and older people along with self-employed and part-time workers have been most impacted by the redundancies. The government has announced measures such as the Kickstart scheme to create employment opportunities for the young people but it may not be sufficient as the number of redundancies continues to rise.
The government has indicated that further action may be taken if the outlook for the labour market worsens. Several options are being explored although the furlough scheme will not be extended.
As redundancies have picked up, so has unemployment
ONS surveys showing there had been a steady flow off workers off furlough scheme since July, and only a limited increase in redundancies over the summer. https://t.co/Z0Hm5kolBJ pic.twitter.com/IWNxDn1zdy
— Linda Yueh (@lindayueh) September 16, 2020
Timothy Taylor, an economist, shared an article on how foreign direct investment (FDI) was already declining even before the pandemic owing to the 2008 financial crisis. The decline in FDI was more concentrated in high-income countries falling by approximately 60%. The decline for developing economies was lesser but was still lower than the figures in the mid-2000s.
The article attributes the decline to various factors including changing business models, and technology costs. Further, a rise in labour costs and the development of advanced manufacturing technologies eroded the competitive advantage of developing countries. A decline in commodity prices has also affected FDI inflows into countries that are dependent on commodities.
— Timothy Taylor (@TimothyTTaylor) September 16, 2020
Pedro Nicolaci da Costa
Pedro Nicolaci da Costa, Federal Reserve & economy correspondent at Market News International, shared an article on how the unemployment rate in the US has declined below 10% to 8.4% for the first time since March.
The official unemployment rate is still lower than the unemployment rate from a historically comparable perspective as an extra 1.1 million people are being accounted for as employed although they are not at work for other reasons.
The future of the labour market in the US will depend on the decline in the number of cases, the extension of unemployment benefits, and how quickly people can return to their old jobs, the article noted.
The "realistic" unemployment rate of 9.9% remains higher than the official rate of 8.4% for two reasons:
➡️ 1.1m workers misclassified as employed
➡️ 3.7m have left labor force, more than would be expected even with the rise in unemployment.
More: https://t.co/zmFISMod1m pic.twitter.com/C75cJz8kW0
— Peterson Institute (@PIIE) September 16, 2020
Adam Posen, president of Peterson Institute for International Economics, shared an article comparing the impact of the COVID-19 pandemic on health and unemployment in the US to other OECD countries. The unemployment rate in the US between January and July was five times higher at 6.6% compared with 1.22% for OECD countries.
In terms of the number of cases, the US has four times the number of cases compared with the average number of cases in a high-income OECD country. Further, the number of total deaths per capita is over twice as high in the US compared to OECD countries.
The article notes that the health and unemployment outcomes in the US are much worse than other high-income countries. Although the unemployment rate has started to decline since August, the number of coronavirus cases and deaths has not improved.
New research by @HolzerHarry finds that if the U.S. had done as well as the average, wealthy OECD country, over 100,000 more Americans would be alive and nearly 9 million more would be employed. https://t.co/5nI1tUmPnx
— Michael R. Strain (@MichaelRStrain) September 16, 2020