The 38-member economic cooperation body warns that health, high inflation, supply chain bottlenecks and potential policy missteps are "all key concerns" going forward.

Global economy is expected to grow by 5.6 percent this year, down from an earlier forecast of 5.7 percent, OECD says.
Global economy is expected to grow by 5.6 percent this year, down from an earlier forecast of 5.7 percent, OECD says. (AP)

The OECD has warned that the Omicron coronavirus variant threatens the global economic recovery as it lowered the growth forecast for 2021 and appealed for a swifter rollout of Covid vaccines.

The Paris-based Organisation for Economic Co-operation and Development stressed that the recovery has "lost momentum" as it cut the outlook of top economies including the United States, China and the eurozone.

"We are concerned that the new variant of the virus, the Omicron strain, is further adding to the already high levels of uncertainty and risks, and that could be a threat to the recovery," OECD chief economist Laurence Boone said at a press conference on Wednesday.

While the OECD said it was "cautiously optimistic" about the recovery, it warned that health, high inflation, supply chain bottlenecks and potential policy missteps are "all key concerns".

"The top policy priority remains the need to ensure that vaccines are produced and deployed as quickly as possible throughout the world, including booster doses," the OECD said.

"The recovery will remain precarious and uncertain in all countries until this is achieved."

READ MORE: OECD: ‘A global economic recovery is in sight’

Fears of 'deadlier strains'

In the "more benign scenarios", outbreaks could continue to prompt restrictions on people's movements, which could have long-lasting consequences on labour markets, production capacity and prices.

"The harshest scenario is that pockets of low vaccination end up as breeding grounds for deadlier strains of the virus, which go on to damage lives and livelihoods," Boone warned.

Developed countries of the Group of 20 wealthy and emerging nations have spent $10 trillion to prop up their economies during the pandemic, while vaccinating the planet would cost only $50 billion, Boone told reporters.

"It would be a big mistake to believe the job has been or is almost done," she said.

Analysts at Oxford Economics say Omicron could shave 0.25 percentage points off global growth next year if it causes mild effects, but it would cost two percentage points if it is more dangerous and a large part of the global population was forced into lockdowns.

Growth expectations

The economy is now expected to expand by 5.6 percent this year, down from an earlier forecast of 5.7 percent, the OECD said in its updated economic outlook which warns that low vaccination areas could create "breeding grounds" for deadlier virus mutations.

Its forecast for 2022 remains unchanged at 4.5 percent, but the report was released only days after Omicron was detected.

The strain has been spotted around the world since South African experts discovered its existence, prompting new travel restrictions. 

The World Health Organization believes the variant's high number of mutations might make it more transmissible or resistant to vaccines.

READ MORE: No recovery in global jobs market forecast until 2023 due to Covid

Source: AFP