OECD sounds alarm on EU's slow vaccine rollout as UK outlook improves

·3-min read
Pic taken on 8 December 2020
British prime minister Boris Johnson applauds as a nurse gives the Pfizer/BioNTech COVID-19 vaccine to Lyn Wheeler at Guy's Hospital in London. Photo: Frank Augstein/Reuters

The Organisation for Economic Cooperation and Development (OECD) has upgraded its forecasts for the UK economy, citing the rapid rollout of COVID-19 vaccines, but chided the EU for the slow pace of its inoculation campaign.

The OECD on Tuesday said it expects the UK economy to grow by 5.1% this year and 4.7% in 2022.

At its last update in December, the OECD had forecast UK GDP growth of 4.2% in 2021 and 4.1% in 2022.

Laurence Boone, the OECD's chief economist, said the upgrade was driven by the rapid rollout of COVID-19 vaccines, which will allow Britain to unlock its economy and start to bounce back.

The OECD raised its economic forecasts across the board, saying US president Joe Biden's huge $1.9tn (£1.37tn) stimulus package was expected to add a whole percentage point to global growth. The OECD now expects world GDP to expand by 5.6% this year — a huge upgrade from its previous forecast of 4.2%.

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"Activity in many sectors has picked up and partially adapted to pandemic restrictions," the OECD said. "Vaccine rollout, although uneven, is gaining momentum and government stimulus, particularly in the United States, is likely to provide a major boost to economic activity."

"Across the globe we have revised up our projections by a sizeable amount," said Laurence Boone, the OECD's chief economist.

The OECD's March forecasts. Photo: OECD
The OECD's March forecasts. Photo: OECD

While the OECD was generally more optimistic, the organisation flagged serious concerns about the speed of vaccine rollouts in some parts of the world — notably Europe.

“Countries like Germany and France, mainly in Europe, are vaccinating far more slowly," Boone said at a press conference on Tuesday. “That makes it harder to recover.

“Not vaccinating quickly enough also risks undermining the fiscal stimulus that has been put in place.”

The OECD upgraded its EU growth forecast by 30 basis points to 3.9% — a much smaller uplift than seen elsewhere.

Boone urged the EU to get on "a war footing" when it came to vaccine rollouts.

"We need to go much faster and we need to do much better," she said.

Boone said the uneven rollout of vaccines around the world would worsen regional economic inequalities. It also threatened to increase disparities between economic sectors, for example by making it harder for the travel industry to reopen around the world.

“Speed is of the essence,” said OECD secretary-general Angel Gurría. “There is no room for complacency. Vaccines must be deployed faster and globally."

The OECD said global output was forecast to reach pre-pandemic levels by the middle of this year but cautioned that "much will depend on the race between vaccines and emerging variants of the virus."

"Prospects for sustainable growth vary widely between countries and sectors," the OECD said. "Faster and more effective vaccination deployment across the world is critical."

Boone said there was "some reasons to be concerned about inflation" due to global supply chain issues, the size of US stimulus, and migrant labour shortages around the world. However, she noted there was “significant slack in the labour market worldwide.”

Watch: OECD sees quickening growth, but risks and inequalities remain