OECD forecasts 'a sea of red for 2020': Secretary general
The Organization for Economic Co-operation and Development (OECD) is predicting an economic contraction for the global economy this year – including the potential for Canada’s output to sink almost 10 per cent – as governments and households pile on debt due to the COVID-19 pandemic.
“It’s a sea of red for 2020. Some recovery in 2021, but not enough to go above the level of 2019,” OECD Secretary General Angel Gurría told BNN Bloomberg’s Jon Erlichman Wednesday. “It’s that bad.”
“It’s going to be tough for the next 18 months because we believe the recovery is going to be like a U-shape, rather than a V-shape.”
The OECD presented “two equally likely scenarios” in its forecast for the first time, rather than a baseline scenario, amid lingering uncertainty around the virus’s potential future impact.
The Paris-based organization estimates the global economy shrinking either six per cent this year or 7.6 per cent this year. Meanwhile, the OECD sees the Canadian economy contracting by either eight or 9.4 per cent in 2020.
“It’s an open economy, therefore more vulnerable to everything that is going on right now,” Gurría said in reference to Canada.
“But we see that in the case of a second wave, should we have a recurrence of this phenomenon, of course we’d have to maybe look at confining some sectors, some cities, some areas, and therefore, we would have a second impact that would pile up.”
Canadian Prime Minister Justin Trudeau played down the idea of the government releasing its traditional fiscal update when speaking to reporters Tuesday.
“There are so many things that we simply don’t know, that making projections about what our economy could look like six months from now or a year from now would be an exercise in invention and imagination,” Trudeau said.
Gurría acknowledged it is “very difficult” to set projections right now.
“We can only [put forth] as great an effort as we can,” he said.
With respect to its own forecast, Gurría said OECD applied modelling, assumptions and basic fundamentals to present possible future scenarios.
“What we really do not know is whether there will be a recurrence [of new COVID-19 cases],” he said. “What we’re saying is, let’s be extremely prudent in the way we are looking at forecasting, looking at projections going forward because there may be this possibility.”