Differences in vaccination rates pose risk to global recovery, OECD warns

Large differences in vaccination rates between countries and renewed outbreaks of the virus are adding to the unevenness of recovery in the global economy, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday.

In its latest global outlook report, the OECD warns that to keep the recovery on track, stronger international efforts are needed to provide low-income countries with the resources to vaccinate their populations.

The report comes amid the emergence of the Omicron variant of Covid-19, which health experts link to unheeded warnings about vaccine inequity.

In its report, the OECD also notes a rapid increase in demand, as economies reopen, has pushed up prices in key commodities such as oil and metals. “Tensions along supply chains caused by the pandemic have added to cost pressures. At the same time, shipping costs have increased sharply,” it said.

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In its report, the influential think tank said the global economy is growing far more strongly than anticipated a year ago but the recovery remains uneven, “exposing both advanced and emerging markets to a range of risks”.

With the vaccine roll-out continuing, it projected “strong global growth” of 5.7 per cent this year and 4.5 per cent in 2022, little changed from its previous outlook in May of 5.8 per cent and 4.4 per cent respectively.

“Countries are emerging from the crisis with different challenges, often reflecting their pre-Covid 19 strengths and weaknesses, and their policy approaches during the pandemic,” it said.

“Even in the countries where output or employment have recovered to their pre-pandemic levels, the recovery is incomplete, with jobs and incomes still short of the levels expected before the pandemic,” it said.

Inflation

On inflation, it said there was a marked difference in outlook depending on the country or region.

While it has risen sharply in the US and some emerging market economies, it remains relatively low in many other advanced economies, particularly in the euro area, the OCED said.

Euro area inflation hit a record 4.9 per cent in November. It is running at 6.2 per cent in the US.

While rapid increase in demand combined with supply chain disruption has accelerated price, the OECD said “these inflationary pressures should eventually fade”.

Consumer price inflation in the G20 countries is projected to peak towards the end of 2021 and slow throughout 2022, it said, while noting wage growth remains broadly moderate and medium-term inflation expectations remain contained.

OECD secretary-general Mathias Cormann said: "The world is experiencing a strong recovery thanks to decisive action taken by governments and central banks at the height of the crisis.

“But as we have seen with vaccine distribution, progress is uneven. Ensuring the recovery is sustained and widespread requires action on a number of fronts – from effective vaccination programmes across all countries to concerted public investment strategies to build for the future,” he said.