The need for speed: Faster vaccine rollout critical to stronger recovery, says OECD

By Jane Byrne contact

- Last updated on GMT

© GettyImages/Chaz Bharj
© GettyImages/Chaz Bharj

Related tags: OECD, vaccination campaign, pandemic

A global economic recovery is in sight but a faster and more effective vaccination rollout across the world is critical, while respecting necessary health and social distancing measures, according to the OECD’s latest Interim Economic Outlook.

Activity in many sectors has picked up and adapted to pandemic restrictions over recent months. Vaccine deployment, although uneven, is finally gaining momentum and government fiscal stimulus – particularly in the US – is likely to provide a major boost to economic activity, said the Organization for Economic Co-operation and Development (OECD).

The OECD Outlook calls for ramping up vaccination, for swifter, more targeted fiscal stimulus to foster output and confidence, and to maintain income support for people and businesses hard hit by the pandemic while preparing the ground for a sustainable recovery.

Speed is of the essence,”​ said OECD secretary-general, Angel Gurría. “There is no room for complacency. Vaccines must be deployed faster and globally. This will require better international co-operation and co-ordination than we have seen up to now. It is only by doing so that we can focus our attention on building forward better and laying the foundations for a prosperous and lasting recovery for all.”

The OECD sees global GDP growth at 5.6% this year, an upward revision of more than 1 percentage point since its projection in December 2020, and 4% in 2022. World output is expected to reach pre-pandemic levels by mid-2021 but the pace and duration of the recovery will depend on the race between vaccines and emerging variants of the virus.

The outlook for global growth would be better than currently projected – and approach pre-pandemic projections for activity – if the production and distribution of vaccines accelerates, is better coordinated around the world and gets ahead of virus mutations. This would allow containment measures to be relaxed more rapidly, stressed the organization.

But if vaccination programs are not fast enough to cut infection rates or if new variants become more widespread and require changes to current vaccines, consumer spending and business confidence would be hit.

Presenting the Interim Economic Outlook today, OECD chief economist, Laurence Boone, said vaccination programs and stimulus measures should work hand in hand.

“Widespread vaccination of the adult population is the best economic policy available today to get our economies and employment growing again,”​ she said. “If we are at war with the virus then we need to put vaccine production on a war footing, provide the necessary resources and speed up deployment across the world.”

“If we don’t get enough people vaccinated quickly enough to allow restrictions to be lifted, the recovery will be slower and we will undermine the benefits of fiscal stimulus​,” she added.

Global growth projections, tie-in with pace of vaccination rollout

In the OECD’s central scenario, US growth is projected to be 6.5% in 2021, an upward revision of more than 3 percentage points since December, partly reflecting the large-scale fiscal stimulus now planned with a sustained pace of vaccination.

This also helps to lift output around the world. In the euro area, where the level of fiscal stimulus is lower and vaccine rollout slower, the Interim Economic Outlook sees GDP rising 3.9%, a 0.3 percentage point upward revision.

Prospects are brighter in the Asian-Pacific region where several countries have effectively contained the virus and where industrial activity has regained dynamism. In China, GDP growth is projected to be 7.8% this year; in Japan 2.7%; in Korea 3.3%; and in Australia 4.5%.

The recovery is likely to be more moderate in the emerging market economies of Latin America and Africa amid a resurgence of the virus, slow vaccine deployment and limited scope for additional policy support. 

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