THE WORST RECESSION IN PEACE

ACCORDING TO THE OECD

The world economy will suffer its worst recession in peacetime this past 100 years before returning to growth next year, the OECD estimates on Wednesday.

Due to the “exceptional uncertainty” of the economy this year, the OECD presents its forecasts taking into account two scenarios. One with a second wave of the Covid-19 pandemic spreading across the planet in late 2020, the other without. In the first case, the most unfavorable, the contraction of the world economy would be 7.6% this year and the recovery in 2021 at 2.8%. In the second case, world GDP should contract by 6.0% this year before rebounding by 5.2% in 2021.

According to OECD projections, the United States, the world's largest economic power, must prepare for a contraction of 7.3% of its GDP this year before a rebound of 4.1% next year. In the event of a second wave, the recession would be 8.5% this year, and US GDP would only regain 1.9% in 2021.

China, still championing growth last year with 6.1%, will also see its economy contract, by 2.6%, or even 3.7% this year if the virus resurfaces massively.

The eurozone is moving towards a contraction of 9.1% this year, followed by a recovery of 6.5% next year. In the scenario of a second wave, the decline would also be more marked (-11.5%) and the recovery more modest in 2021 (+ 3.5%).

France a brutal recession in 2020

According to the OECD, France will experience one of the largest drops in GDP in the world. The economic horizon of France and the countries of the euro zone is darkening a little more. According to forecasts by the Organization for Economic Cooperation and Development (OECD), published Wednesday June 10, the contraction of gross domestic product (GDP) will be between 11.4% and 14.1% in 2020 in France.

The largest contraction in the world, in the same proportions as in Spain, Italy and the United Kingdom. Even Argentina, which has just entered into default at the end of May, will fare better with an expected drop in GDP between 8.3% and 10.1%. It is in the euro zone that the dropout rate, between - 9.1% and - 11.5%, will be the most brutal on the planet.

The French economy has accumulated handicaps during this period. "Its comparative advantages lie in sectors among the most affected by the crisis such as air transport, tourism or even luxury," explains Daniel Cohen, director of the economics department of the École normale supérieure. And the Hexagon had no other solution than massive confinement, unlike Germany which had prepared for the pandemic earlier. "

States urged to go into debt to support workers

"By the end of 2021, the loss of income will exceed that recorded in all previous recessions of the past 100 years, with the exception of periods of war, with extreme and lasting consequences for populations, businesses and governments, ”said Laurence Boone, the chief economist of the OECD, in an introduction to these updated forecasts.

She therefore urges governments not to be afraid of resorting to debt to finance mechanisms to support the least paid workers and investments, explaining that the responses to the crisis will shape the economic and social outlook for the next ten years. .

"Ultra-accommodative monetary policies and higher public debt are necessary and will be accepted as long as economic activity and inflation remain depressed and unemployment remains high," she continues.

"Everywhere, confinement has reinforced the inequalities between workers", the most qualified able to telework while the young and the less qualified are "often on the front line" in the fight against the pandemic, notes the chief economist of the OECD. The Covid-19 also "accelerated the shift from a 'big integration' to a 'big fragmentation'" of the world economy with the appearance of "additional restrictions on trade and investment", according to Boone .

"Fairer and more sustainable" economy

To allow the economy to recover, the OECD notably recommends “strengthening health systems”, “facilitating changes in occupations while strengthening income protection”, and “making supply chains more resilient ”.

"Governments must seize this opportunity to design a fairer and more sustainable economy, make competition and regulations more intelligent, modernize taxation, spending and social protection," advocates Laurence Boone. It points to the essential role of confidence, without which neither consumption nor investment will restart.

And since the threat of a second wave of contagion keeps the uncertainty at a high level, Laurence Boone adds that the moment is certainly not to stir up the flames of trade tensions and that governments must cooperate in research and development of treatments and a vaccine against SARS-CoV-2.