By Paul Hannon 

The prospect of coronavirus vaccines on the horizon has boosted hopes of an end to the pandemic-wrought downturn -- but first the global economy could face a long and difficult winter.

Government restrictions and consumers' fear of infection will continue to weigh on the global economy well into next year, even as vaccine developments offer hope of an end to the pandemic, the Organization for Economic Cooperation and Development said Tuesday.

When the world's economy does come back, China will emerge as the big winner, according to the research body, accounting for as much as one-third of next year's recovery, as Western countries slowly shake off the effects of 2020's record-setting contractions.

Releasing new forecasts since a number of pharmaceutical companies said their vaccines were highly effective in recent tests, the OECD said governments must continue to provide support to their economies to ensure a speedy return to pre-pandemic levels of activity.

"It's not like we get a vaccine and in a month everything returns to normal," said Laurence Boone, the OECD's chief economist.

The group cut its growth forecasts for most leading economies, citing a recent surge in infections across the Northern Hemisphere that had prompted new restrictions on households and businesses and caution among consumers.

It now expects the global economy to grow by 4.2% in 2021, having contracted by the same degree this year. In September, when it last released quarterly forecasts, it expected the economy to grow by 5% next ear.

The OECD cut its forecast for economic growth in 2021 in the U.S. to 3.2% from 4%, and its forecasts for the eurozone to 3.6% from 5.1%. It left its growth forecast for China at 8%.

Those forecasts are based on what Ms. Boone said was a "cautious" view of the logistics of manufacturing and deploying vaccines, as well as levels of takeup in populations that may be skeptical about safety.

The OECD expect most economies to be operating under some form of constraint until the final months of 2021.

"For most of next year, we will have to rely on non-pharmaceutical interventions to keep on living," Ms. Boone said.

The OECD said the pace of the recovery would continue to be very uneven across countries. In the final quarter of 2021, China's economic output is expected to be 9.7% higher than it was in the final three months of 2019. By contrast, Argentina's economic output is forecast to be 8% lower.

U.S. output is expected to recover to its pre-pandemic level by that time, but the eurozone's output is projected to be 3% lower, and the U.K.'s 6.4% down on the final quarter of last year.

According to those projections, China will account for roughly one-third of the increase in global economic output next year. Ms. Boone said the pandemic appeared to have accelerated China's rise as an economic power.

"There is a rebalancing in the global economy," she said.

The OECD said the world outlook remained highly uncertain. A more rapid deployment of effective vaccines could boost global growth to 5% in 2021 and 5.5% in 2022, while a slower deployment would weaken the expansion to 1.45% next year and 2.2% in 2022.

The Paris-based body provides policy advice to its members, which include the U.S. It urged governments to continue helping the neediest households and businesses and provide broader-based stimulus to boost demand and speed the rebound.

Ms. Boone said the OECD's forecasts assumed fresh fiscal stimulus in both the U.S. and Europe, adding that it would be a blow to confidence not to provide it.

"It would be reassuring for businesses and households to know we have learned from the last crisis," she said.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

December 01, 2020 06:47 ET (11:47 GMT)

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