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An employee works on an automobile assembly line at a factory owned by Daimler in Kawasaki, Japan, on May 18, 2020.Issei Kato/Reuters

The outlook for the global economy is improving despite a second wave of coronavirus outbreaks in many countries as vaccines emerge and a Chinese-led recovery takes hold, the OECD said on Tuesday.

The global economy will grow 4.2 per cent next year and ease to 3.7 per cent in 2022, after shrinking 4.2 per cent this year, the Organisation for Economic Cooperation and Development said in its latest Economic Outlook.

After a second wave of infections hit Europe and the United States, the Paris-based policy forum trimmed its forecasts from September, when it expected a global contraction of 4.5 per cent before a 5 per cent recovery in 2021. It did not have a 2022 forecast at the time.

“We’re not out of the woods. We’re still in the midst of a pandemic crisis, which means that policy still has a lot to do,” said OECD chief economist Laurence Boone.

Overall global gross domestic product will return to pre-crisis levels by the end of 2021, led by a strong recovery in China, the OECD said.

But that masked wide variations among countries, with output in many economies expected to remain about 5 per cent below pre-crisis levels in 2022.

China will be the only country covered by the OECD to see any growth at all this year, at 1.8 per cent, unchanged from the last forecast in September. It will gain speed to 8 per cent in 2021 - also unchanged - before easing to 4.9 per cent in 2022.

The United States and Europe are expected to contribute less to the recovery than their weight in the global economy.

After contracting 3.7 per cent this year, the U.S. economy will grow 3.2 per cent in 2021 and 3.5 per cent in 2022, assuming a new fiscal stimulus is agreed. In September, the OECD had forecast a contraction of 3.8 per cent this year and a rebound of 4 per cent next year.

The euro area economy will contract 7.5 per cent this year, with many economies finishing the year in a double-dip recession after re-imposing lockdowns. Its economy will see growth return in 2021 at 3.6 per cent and 3.3 per cent in 2022.

Though hard hit, the forecasts were an improvement from September, which had foreseen a contraction of 7.9 per cent this year and a 5.1 per cent rebound in 2021.

Finance Minister Chrystia Freeland says the Liberals plan a stimulus program of up to $100-billion once the COVID-19 pandemic is on the run, but until then attacking the virus and helping those who need support is their top priority.

The Canadian Press

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