OECD warns of long-term economic recovery

Published by Scott Challinor on March 23rd 2020, 9:09am

The Organisation for Economic Co-Operation and Development [OECD] secretary general, Angel Gurría, has said that the world will have to deal with the economic impact of the coronavirus outbreak "for years to come".

Gurría added that the impact is already more serious than that of the 2008 global financial crisis, explaining that a recent prediction that global growth could be halved to 1.5 per cent was already likely to be exceeded and that some of the world's largest economies would enter recession.

He also told the BBC that any prospect of countries recovering quickly was "wishful thinking", after G20 officials had predicted a 'V' shape recovery, with a sharp drop in the economy followed by a quick recovery.

"I do not agree with the idea of a 'V' shaped phenomenon.

"Right now we know it's not going to be a 'V'. It's going to be more in the best of cases like a 'U' with a long trench in the bottom before it gets to the recovery period. We can avoid it looking like an 'L', if we take the right decisions today."

It looks likely, therefore, that it will take some years for the world's economies to fully recover.

Gurría added: "Even if you don't get a worldwide recession, you're going to get either no growth or negative growth in many of the economies of the world, including some of the larger ones, and therefore you're going to get not only low growth this year, but also it's going to take longer to pick up in the in the future."

He explained that the economic uncertainty generated by the outbreak has made it even more of an economic challenge than the financial crash of 12 years ago.

"The reason [that the outbreak is more serious than the financial crisis] is that we don't know how much it's going to take to fix the unemployment because we don't know how many people are going to end up unemployed. We also don't know how much it's going to take to fix the hundreds of thousands of small and medium enterprises who are already suffering."

The UK government has already tried to mitigate the economic impact with a raft of promises, including paying the wages of employees who cannot work during this time.

Gurría urged policymakers worldwide to set aside borrowing rules and "throw everything" at trying to stave off coronavirus, while conceding that the larger deficits would eventually have their own impact on affected countries.

The OECD has recommended a four-point plan to combat coronavirus, which includes free testing being made available, better quality equipment for front-line workers, money being provided to those who are unable to work - including the self-employed - and allowing tax holidays for businesses struggling to see out the period.

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Authored By

Scott Challinor
Business Editor
March 23rd 2020, 9:09am

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