Remarks by Angel Gurría, Secretary-General, OECD

Paris, France, 1 December 2020

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Dear friends,

I am pleased to be here  to present the latest OECD Economic Outlook with our Chief Economist, Laurence Boone.

For the first time since the pandemic hit in early 2020, we have hope. The good news about vaccines has instilled a degree of optimism and dissipated the fog of uncertainty.

There is hope, we’re not out of the woods yet. Many countries are currently fighting a resurgence of the virus, and the re-imposition of containment measures is denting the economic rebound that had begun. Even with a slower and more cautious “de-confinement” this time, further waves cannot be ruled out until most of the population is vaccinated.  We assume that this will not happen until the end of 2021, given the logistical challenges.

On the face of it, our projection for global GDP growth in 2021, at 4.2%, looks vigorous. But this would still leave almost all OECD economies smaller at end-2021 than they were at the end of 2019. And we see global GDP being some 6 trillion US dollars lower by end-2022 than it would have been in our pre-pandemic projections. In both human and economic terms, this pandemic will have been extremely costly.

No doubt some things could have been done better. By and large, however, the response has been remarkably successful. The spread of the virus has been checked in most places, the worst of the economic fall-out has been avoided, and multiple vaccines have been developed in record time. The key message for the months ahead is therefore to keep on doing what has worked well so far.

On the health side, this means that, where the incidence of infections is low enough, test-trace-isolate systems should be used to contain the virus at minimum economic cost. No resources should be spared to build up the capacity to do this effectively, as well as to increase the resilience of health systems.

Where incidence is too high for that to be effective, restrictions on mixing may still be needed, though as we learn more about transmission, it may be possible for these measures to be less stringent than before. In any case, we still see no meaningful trade-off between lives and livelihoods: defeating the virus is the only effective way to protect the economy.

On the economic side, governments should continue to mitigate the impact of the pandemic on people and firms. There is still a strong case for large-scale support for the economy in the remaining months of the pandemic, despite the availability of vaccines meaning that the end is in sight.

The main new element in the policy response is rolling out the vaccine, or vaccines, as quickly and as widely as possible. This is partly a matter of national planning, but if COVID-19 is to cease to be a threat to our societies and economies, we have to beat it everywhere. This means international cooperation is essential. We welcome the G20 leaders’ commitment to support all collaborative efforts, especially the COVAX facility set up to ensure the equitable distribution of vaccines to developing countries. USD 2 billion has already been pledged to COVAX, but more is required.

As we emerge from the pandemic, reinvigorated international cooperation is called for in other areas as well.

Most crucial of all is climate, where stronger commitments and more determined action are both urgently needed.

Another is trade, where there are a host of issues requiring multilateral attention.

In addition, COVID-19 has also aggravated debt sustainability problems among developing economies that will likely need further cooperation among governments in creditor countries.

From the OECD perspective, it is particularly important to conclude an international agreement on taxation issues related to the digital economy. Such an agreement, which is close, could yield around USD100 billion in additional revenue annually, accruing to advanced and emerging market economies alike. It would be an important step towards fairer taxation globally. The likely alternative – the unilateral introduction of digital services taxes by some countries, triggering retaliation from others – would be bad for everyone.

The pandemic has reminded us that some problems are inherently global and also how costly such global problems  can be.  But it has also reminded us how powerful international cooperation can be too. Our hope is that this episode will spur a new impetus towards facing our shared problems together through multilateral action.

Let me now turn it over to Laurence to take you through the Outlook in more detail.