The Organization for Economic Co-operation and Development (OECD) on Wednesday downgraded its global economic growth forecast for 2021, while calling for faster distribution of COVID-19 vaccines, warning that space could otherwise be left for other, even more dangerous strains of the virus.
The organization estimates that the global economy will grow by 5.6 percent this year, up from 5.7 percent previously forecast, according to the updated economic outlook.
"The global recovery continues to move forward, but is losing momentum and becoming increasingly unbalanced," the Paris-based organization said.
Although the OECD said it remained "cautiously optimistic" about the economic recovery, it warned that health care, high inflation, supply chain barriers and possible policy mistakes were the main areas of concern.
"The need to ensure that vaccines are produced and distributed worldwide, including booster doses, as soon as possible remains a key policy priority," the OECD said.
"The global recovery will remain inconsistent and volatile until it is achieved," the report said.
In "milder scenarios", outbreaks can lead to further restrictions on the movement of people, which can have long-term consequences for labor markets, production capacity and prices.
"The worst-case scenario would be that low-vaccination sites would become the site of deadly strains of the virus, which would be fatal and detrimental to livelihoods," OECD chief economist Laurence Boone warned in a statement.
However, although the forecast for this year has been reduced, the growth forecast for 2022 has remained unchanged at 4.5 percent.
The report does not take into account the potential effects of the omicron variant.
Analysts at Oxford Economics say the new strain could cut global growth by 0.25 percentage points next year if its spread had little effect, but if it were more dangerous and forced to isolate a large part of the world's population, it would cost the global economy two percentage points.
Cases of the new omicron variant have been identified around the world since South African (PAR) researchers discovered its existence, leading to new travel restrictions.
The World Health Organization believes that the high number of mutations in this variant could make it more contagious or more resistant to vaccines.
On other issues of great concern, the OECD has projected that inflation in its members will peak at the turn of the year and then gradually decline.
Rapidly rising inflation has caused turmoil in markets as investors fear central banks will raise interest rates faster than expected to curb accelerating prices.
The OECD has called on monetary policy makers to "communicate clearly" about how long they will tolerate inflation in excess of their target.
Meanwhile, supply constraints and shortages "are expected to gradually decline between 2022 and 2023" as demand normalizes, production capacity grows and more people return to the labor market.
The OECD has also highlighted the "significant" differences in the pace of recovery around the world.
"Part of the global economy is recovering rapidly, but other countries are at risk of being sidelined, especially lower-income countries with low vaccination rates and companies and workers in intensive contact sectors where demand has not yet fully recovered," the report said.
In its forecast for individual regions, the OECD estimates that the US economy is expected to grow by 5.6 percent this year. - less than previously calculated.
The growth outlook for the euro area has been reduced to 5.2 per cent.
China’s second-largest growth forecast for the world has been cut to 8.1 percent this year, and by 2022. - up to 5.1 percent.
The situation with the real estate giant Evergrande and the impact on the wider economy of the debt crisis facing the real estate developer are worrying for the Chinese economy.