The latest OECD report shows how important the vaccine rollout is to economies around the world

Editorial: Many rich nations will recover to pre-pandemic levels next year but progress will be highly uneven and every nation will need vaccination to progress as swiftly as possible

The vaccine rollout is important to economies around the world (PA)

The latest forecast for the world economy from the Organisation for Economic Co-operation and Development (OECD) is unusual in many ways, but the most striking aspect is that it makes clear vaccination rollout against Covid-19 – rather than the usual prescriptions about fiscal, monetary or trade policy – emerges as much the most effective instrument in getting the world back to sustainable economic growth.

Vaccination – for the sake of the economy as well as public health – must be done urgently and on a truly global scale. Without it, the world may never be as stable as it was before.

As things stand, much of the world will have returned to pre-pandemic levels of output by the end of next year – but the progress is varied and the prospects uncertain. America, China and Germany are the major economies leading the way, and already at, or near to, their 2019 output “peaks”. Britain will also stage a comeback to some kind of economic normality by the spring of 2022.

However, many emerging nations will take much longer, with the likes of South Africa and Argentina not seeing a recovery before 2024. That, such as it is, is the good news; but the fact remains that around a tenth to a fifth of annual world economic output – trillions of dollars worth of goods and services – has been lost forever. It can never be recovered, no matter how rapidly the world economy expands in the coming years.

That is the economic price of the pandemic, with all it implies for living standards and health outcomes among people across the globe. For households, businesses (large and small) and governments, the pandemic has left a huge overhang of debt. It has added hugely to the already gross global imbalances between debtor and creditor economies, adding to long-term instability. Even in an optimistic scenario, long after the masks and social distancing recede into history, the financial effects of Covid-19 will be making themselves felt.

As the OECD states, the world’s economic recovery will be highly uneven, and quite unlike a normal recovery from an economic downturn. It will also be one that is highly contingent on forces beyond human control – principally the mutations of the coronavirus. The OECD, like the World Health Organisation, makes the point that in economics, as in public health, the country is not safe unless all are safe. One of the greatest of dangers facing a globalised world economy so dependent on trade and cross-border flows of investment and people is the effect if vaccination programmes in some areas lag behind. The OECD endorses the common sense argument that the cost of vaccinating the world against Covid-19 is trivial compared to the human and economic cost of losing lives, of stop-go lockdowns, closed borders and periodic Covid-driven recessions.

Britain seems to be suffering more than most from the after-effects of economic “scarring” among the G7 of comparable large industrialised states. After the various support programmes are withdrawn, unemployment is set to rise to 6.1 per cent by the end of this year, and a generation of younger workers may find it more difficult to find good jobs with wages that afford them a decent lifestyle, and the longer they remain unemployed the less likely it is they will be able to retain or acquire the skills to make the most of the opportunities that do arise.

Inflation is likely to rise, albeit temporarily, reflecting shortages and bottlenecks from a very rapid rise in pent-up demand in some sectors, which will depress living standards. So, too, will an eventual rise in the levels of tax and restraints on spending on public services, as the national finances are repaired – a task that should be delayed until the economy finds a firmer footing. Brexit is likely to continue to impair exports and inward investment.

The outlook, then, in Britain and the wider world is mixed, and the way forward unclear. However, three most important fundamental factors highlighted by the OECD as the essential condition for robust economic health cannot be emphasised enough – vaccination, vaccination and vaccination.