OECD INTERIM ECONOMIC OUTLOOK, 21 SEPTEMBER 2021

KEEPING THE RECOVERY ON TRACK

Mathias Cormann and Laurence Boone

OECD Secretary-General and OECD Chief Economist

Click here to get the figures and data from the presentation
 Overview

• A strong global recovery is underway, but it is too uneven: some countries are
still struggling and many people remain out of work

• Vaccination rates vary substantially around the world, limiting the ability of
some countries to fully reopen and increasing tensions in global trade and supply
chains

• Demand for some goods has surged, pushing up inflation. This is being
compounded by tensions in supply chains, shortages in some sectors and
higher shipping and commodity prices

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 The global recovery is strong, yet uneven
GDP: G20 advanced economies GDP: G20 emerging market economies
Index 2019Q4=100 Index 2019Q4=100

115 115

110 110

105 105

100 100

95 95

90 90

85 85

2020 2021 2022 2020 2021 2022

Note: The November 2019 OECD Economic Outlook projections are extended into 2022 using the November 2019 estimates of the potential output growth rate for each economy in
3
2021.
Source: OECD Economic Outlook databases; and OECD calculations.
 Real GDP growth projections
% change, year-on-year

2020 2021 2022 2020 2021 2022

World -3.4 5.7 4.5 G20 -3.1 6.1 4.8

Australia -2.5 4.0 3.3 Argentina -9.9 7.6 1.9

Canada -5.3 5.4 4.1 Brazil -4.4 5.2 2.3
Euro area -6.5 5.3 4.6 China 2.3 8.5 5.8
Germany -4.9 2.9 4.6 India* -7.3 9.7 7.9
France -8.0 6.3 4.0 Indonesia -2.1 3.7 4.9
Italy -8.9 5.9 4.1 Mexico -8.3 6.3 3.4
Spain -10.8 6.8 6.6 Russia -2.5 2.7 3.4
Japan -4.6 2.5 2.1 Saudi Arabia -4.1 2.3 4.8
Korea -0.9 4.0 2.9 South Africa -7.0 4.6 2.5
United Kingdom -9.8 6.7 5.2 Turkey 1.8 8.4 3.1
United States -3.4 6.0 3.9

Note: *India projections are based on fiscal years, starting in April. The European Union is a full member of the G20, but the G20 aggregate only includes countries that are also
4 members in their own right. Spain is a permanent invitee to the G20. World and G20 aggregates use moving nominal GDP weights at purchasing power parities.
Source: OECD Economic Outlook database.
 Employment is still below pre-pandemic levels in most countries
% difference between 2019Q4 and 2021Q2

-2

-4

-6

-8

-10
AUS FRA TUR KOR RUS ESP MEX EA17 ITA JPN GBR CAN DEU USA BRA ZAF

Note: Total employment ages 15-74, national labour force survey definition. Data for the EA17, France and Italy in 2021Q2 are estimates based on the growth of total employment in the
5 national accounts. EA17 refers to the 17 euro area countries that are members of the OECD.
Source: OECD Economic Outlook database; OECD Short-Term Labour Market Statistics; Statistics South Africa; and OECD calculations.
 Inflation is projected to moderate, but less so in some EMEs
Advanced economies Emerging-market economies
% %

USA Euro area JPN BRA CHN MEX

12 12

10 10

8 8

6 6

4 4

2 2

0 0

-2 -2

-4 -4
2005 2007 2009 2011 2013 2015 2017 2019 2021 2005 2007 2009 2011 2013 2015 2017 2019 2021

Note: LHS: Shows the personal consumption expenditure deflator for the United States; the overall harmonised consumer price index for the euro area; and the overall consumer price
6 index for Japan. Euro area refers to the 17 euro area countries that are members of the OECD.
Source: OECD Economic Outlook database; and OECD calculations.
 CPI inflation projections
% change year-on-year, colours indicate the direction of revisions since the June 2021 Economic Outlook

downward revision, by 0.3pp or more no change or smaller than 0.3pp upward revision, by 0.3pp or more
2020 2021 2022 2020 2021 2022
G20 2.7 3.7 3.9

Australia 0.9 2.3 1.8 Argentina 40.4 47.0 48.3

Canada 0.7 3.1 2.8 Brazil 3.2 7.2 4.9
Euro area 0.3 2.1 1.9 China 2.5 1.2 2.2
Germany 0.4 2.9 2.1 India* 6.2 5.9 5.5
France 0.5 1.9 1.4 Indonesia 1.9 2.2 2.9
Italy -0.1 1.6 1.6 Mexico 3.4 5.4 3.8
Spain -0.3 2.4 1.9 Russia 3.4 6.1 5.5
Japan 0.0 -0.4 0.5 Saudi Arabia 3.4 2.9 1.4
Korea 0.5 2.2 1.8 South Africa 3.3 4.2 4.4
United Kingdom 0.9 2.3 3.1 Turkey 12.3 17.8 15.7
United States 1.2 3.6 3.1

Note: *India projections are based on fiscal years, starting in April. The European Union is a full member of the G20, but the G20 aggregate only includes countries that are also
7 members in their own right. Spain is a permanent invitee to the G20. Difference in percentage points, based on rounded figures. There is no comparison available for Saudi Arabia:
the June 2021 Economic Outlook did not include projections for inflation.
Source: OECD Economic Outlook database.
 The risks remain elevated

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 Uneven progress in vaccination is putting the recovery at risk
Vaccination rates reflect different strengths and challenges
At least one vaccine dose, % of national population aged 12 and above

100
90
80
70
60
50
40
30
20
10
0
ESP CHN FRA CAN GBR SAU ITA BRA ARG TUR KOR DEU USA JPN AUS MEX IND RUS IDN ZAF BGD ETH AFG

9 Source: Our World in Data; United Nations; and OECD calculations.

 There are tensions in global supply chains

Orders are increasing While inventories are declining

Manufacturing sector, PMI, Manufacturing sector, PMI,
above 50: increasing below 50: declining
DEU USA KOR DEU USA KOR
80 60

70

60 50

50

40 40

30

20 30
Jan-2019 Jul-2019 Jan-2020 Jul-2020 Jan-2021 Jul-2021 Jan-2019 Jul-2019 Jan-2020 Jul-2020 Jan-2021 Jul-2021

Note: A number above 50 indicates an increase from the previous month; a number below 50 indicates a decrease.
10 Source: IHS Markit.
 Input prices have been pushing up inflation
Commodity and shipping prices have increased Temporarily boosting inflation
Index, January 2019=100 Projected contribution to annual G20 CPI inflation, % pts

Brent Crude Oil Metals and minerals

Food Shipping costs (RHS) Global commodity prices Shipping costs Other factors
250 500 5

4
200 400

3
150 300
2
100 200
1

50 100
0

0 0 -1
Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 2020Q1 2020Q3 2021Q1 2021Q3 2022Q1 2022Q3

Note: LHS: Shipping costs refer to the Shanghai containerised freight rate. RHS: Based on simulations starting in 2020Q1 of the impact of changes in commodity prices and shipping
11 costs on import price inflation and consumer price inflation, using estimates from a panel of G20 countries.
Source: Refinitiv; and OECD calculations.
 Labour market pressures are concentrated in some sectors
Aggregate wage growth remains moderate Shortages are emerging in some sectors
%, year-on-year Growth in average US hourly earnings, %, year-on-year
USA Euro area
5
Information 2021M8
Utilities
2019M12

Financial activities
4
Construction

Total private
3
Private services
Trade, transportation
2 and utilities
Manufacturing

Retail trade
1
Education and health

Leisure and hospitality

0
2005 2008 2011 2014 2017 2020 0 5 10

Note: LHS: For the US, shows the median change in hourly wages of individuals observed 12 months apart in the United States; for the euro area, shows growth in negotiated wage
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rates.
Source: Federal Reserve Bank of Atlanta; European Central Bank; Bureau of Labor Statistics; and OECD calculations.
 Financial market inflation expectations remain contained
Expected inflation in 5-10 years, %

USA Euro area GBR

5

0
2008 2010 2012 2014 2016 2018 2020

Note: Financial market inflation expectations are derived from inflation swaps.
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Source: Refinitiv; and OECD calculations.
 Household inflation expectations are higher but remain contained
In 1 year, % In 5-10 years, %

USA GBR KOR USA GBR

6 6

5 5

4 4

3 3

2 2

1 1

0 0
2005 2008 2011 2014 2017 2020 2005 2008 2011 2014 2017 2020

Note: RHS: Shows expected inflation over the next 5 to 10 years in the US and over the next 5 years in the United Kingdom, according to consumer surveys: the Reuters/University of
14
Michigan Survey of Consumers for the United States and Citigroup/YouGov survey for the United Kingdom.
Source: Refinitiv; Federal Reserve Bank of New York; Bank of Korea; Citi/YouGov; and OECD calculations.
 The recovery is vulnerable in many EMEs
Some central banks have already increased Debt levels are high in many countries
policy rates Debt by sector, % of GDP, 2021Q1
%

TUR (LHS) BRA MEX RUS Non-financial corporations Households General government
25 10 300

250
20 8

200
15 6
150
10 4
100

5 2
50

0 0 0
Jan-20 Jul-20 Jan-21 Jul-21 CHN CHL BRA IND ZAF COL RUS TUR ARG SAU MEX IDN

Note: LHS: For Turkey shows the one-week repo auction rate; for Brazil shows the selic rate; for Mexico shows the overnight interbank interest rate; and for Russia shows the minimum
15 7-day repo rate. RHS: Debt refers to currency and deposits, debt securities, and loans.
Source: Refinitiv; BIS credit statistics; OECD Economic Outlook database; OECD quarterly financial sector accounts; and OECD calculations.
 Rapid house price increases risk putting more pressure on inflation
House prices have increased rapidly Contribution of rents to CPI inflation
during the pandemic % pts
% change between 2019Q4 and 2021Q2 or latest available
CHE DEU FRA IRL SVN USA
38 27 0,4

18 0,3

13 0,2

8 0,1

3 0,0

-2 -0,1
TUR

CZE
NLD

NOR

GBR

FRA
MEX
KOR

SVK

GRC
ZAF

IRL

ESP
USA

DEU

PRT

BEL
RUS

CAN
DNK

CHE
HUN
SWE

AUT

ITA
JPN
LVA
POL

ISR

Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21

Note: LHS: Figure shows nominal house prices. For USA, FRA, CAN, BRA, data refer to 2021Q2; data for other countries refer to 2021Q1. RHS: The chart shows the contribution of
16 actual housing rents to annual inflation.
Source: OECD Analytical house price indicators database; OECD Consumer price indices database; and OECD calculations.
 Policies for transition and recovery

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 Central banks should set out their plans for the recovery
Inflation, %

USA - headline Euro area - headline

USA - expectations Euro area - expectations
6
5
4
3
2
1
0
-1
-2
-3
-4
2006 2008 2010 2012 2014 2016 2018 2020

Note: Headline inflation shows the personal consumption expenditure deflator for the United States and the overall harmonised consumer price index for the euro area. Euro area
18 headline inflation refers to the 17 euro area countries that are members of the OECD. Inflation expectations are based on 5Y5Y inflation swaps, which provide an indication of inflation
expectations from 5 to 10 years time.
Source: Refinitiv; OECD Economic Outlook database; and OECD calculations.
 Fiscal management matters for future growth
Countries are becoming more indebted, Countries with high debt have invested less
but servicing debt is becoming cheaper Government investment in OECD countries,
Median OECD country, % of GDP 2015-2020, % of GDP
Debt level (LHS) Debt service (RHS)
90 5 5

80
4 4
70

60
3 3
50

40
2 2
30

20 1 1
10

0 0 0
1970 1980 1990 2000 2010 2020 Low-debt countries Medium-debt countries High-debt countries
Note: LHS: Debt refers to the OECD definition of general government financial liabilities. Debt service refers to general government gross interest payments. The median is calculated
for all OECD countries for which data are available in a given year. RHS: Excludes OECD countries for which data are unavailable (Chile, Colombia, Costa Rica, Mexico, Turkey).
19 Low debt refers to a public debt ratio of less than 50% of GDP; medium debt to 50-100% of GDP, and high debt to more than 100% of GDP.
Source: OECD Economic Outlook database; and OECD calculations.
 Young people are in need of support
The increase in the unemployment rate was The share of young people not in
larger for young people employment, education or training is high
% pt difference between 2019Q4 and 2021Q2 or latest available % of young people, 2021Q1 or latest available

Young people Prime-aged 2021Q1 or latest available 2019Q4

10 35

8 30

25
6
20
4
15
2
10

0
5

-2 FRA 0
LUX
NLD

NOR

MEX

NZL
GRC
ESP
IRL
SVN
COL

ZAF
EST

USA

DEU
PRT
BEL

FIN

HUN
JPN
ITA
CAN
SWE
POL

ZAF
COL

MEX

FRA

LUX

CZE

NLD
SVK
ESP

EST

IRL

SVN
BEL

PRT

DEU
BRA
ITA

CAN

FIN
CRI

AUT
DNK
LVA
POL
Note: LHS: Young people refers to 15-24 year olds, while prime-aged workers are defined as those aged between 25-54. Data for BEL, EST, GRC, HUN, IRL, ITA, LUX, NLD, POL, PRT,
20 ZAF refer to 2021Q1. RHS: Shows the share of young people not in education, employment or training (NEET). For BRA, CAN, USA and ZAF, latest available data refer to 2021Q2. Data
for all other countries refer to 2021Q1.
Source: OECD Labour Market Statistics database; ILO short-term labour market statistics database; and OECD calculations.
 Key takeaways
• The global recovery has been extraordinarily fast, supporting employment
growth. However, this recovery is uneven. Governments need to vaccinate
globally to ensure a more sustained and balanced recovery

• The speed of the recovery has increased inflationary pressures, quickly

pushing up prices to where we expected them to be before the pandemic. Policy
makers in advanced economies should continue to monitor these developments

• The world is emerging from the recovery with higher debt levels. Policy makers
should build on their good initial crisis management and ensure fiscal policy
is focused on investing to sustainably raise potential growth

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