TOKYO -- The global economy will grow to be bigger than its pre-pandemic level by the middle of this year, the OECD projected in an update of its outlook on Tuesday.
Vaccine rollouts and fiscal policy support in recent months prompted the Organisation for Economic Co-operation and Development to raise its projections for the world economy.
Global gross domestic product is set to pick up to 5.6% this year from a previous projection of 4.2%, the OECD said. Next year, a 4% expansion is projected, up from 3.7%.
The Paris-based policy forum warned, however, that the pace of recovery would differ across countries and sectors.
The OECD warned that sizable risks remain if emerging-market and developing economies are slow to get people vaccinated or if new vaccine-resistant virus mutations emerge. In its worst-case scenario, global growth could be as low as 4.5% this year and 2.75% next year.
"The top policy priority is to ensure that all resources necessary are used to produce and fully deploy vaccinations as quickly as possible throughout the world, to save lives, preserve incomes and limit the adverse impact of containment measures on well-being," the OECD said in its Interim Economic Outlook. "The resources required to provide vaccines to lower-income countries are small compared with the gains from a stronger and faster global economic recovery."
The OECD raised its projections for U.S. GDP growth in 2021 by 3.3 percentage points to 6.5%, citing a faster vaccination rollout and strong fiscal stimulus measures set out in the American Rescue Plan. This will also benefit America's trading partners, especially Canada and Mexico.
Laurence Boone, the OECD's chief economist, said the U.S.'s $1.9 trillion stimulus package, along with the $900 billion that had already been injected into the economy last December, is expected to add a full percentage point to the world economy in the first full year after its enactment.
Boone stressed the importance of fast vaccination to allow full opening of the economy, saying fiscal policies alone would not be effective. "It's the combination of health and fiscal policies that matters," she said at a news conference.
India is seen by the OECD as achieving faster economic growth than other country -- at 12.6% this year followed by 5.4% in 2022.
The country suffered the deepest contraction among Group of 20 economies in the second quarter of 2020, but activity moved above pre-pandemic levels during the fourth quarter thanks to additional fiscal support. The world's second most populous country, with the world's second-highest number of coronavirus cases, launched its inoculation drive on Jan. 16 and had administered more than 23 million anti-COVID shots as of Tuesday.
The growth forecast for China, where the pandemic is largely under control, was revised down to 7.8% from 8.0% this year. The projection for 2022 remained the same at 4.9%.
Japan's economy is expected to expand 2.7% in 2021 and 1.8% in 2022, up 0.4 and 0.3 percentage point, respectively, from the OECD's December forecasts.