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OECD: 'Unprecedented' economic collapse for developed nations

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2 mins read
As Britain enters a period of deep recession, with some shops closing either temporarily or permanently as the economic downturn caused by the Covid-19 pandemic cuts hard, some shops have decided to close in Covent Garden on 13th August 2020 in London, United Kingdom. The Office for National Statistics / ONS has announced that gross domestic product / GDP, the widest gauge of economic health, fell by 20.4% in the second quarter of the year, compared with the previous quarter. This is the biggest decline since records began. The result is that Britain has officially entered recession, as the UK economy shrank more than any other major economy during the coronavirus outbreak. (photo by Mike Kemp/In PIctures via Getty Images)
The OECD said the combined GDP of its members fell by 9.8% in the second quarter of 2020. Photo: Mike Kemp/In PIctures via Getty Images

The economic damage done to developed nations by the COVID-19 crisis has far eclipsed the damage done by the financial crisis, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday.

The OECD, which represents 37 developed nations around the world, said the combined GDP of its members fell by 9.8% in the second quarter of 2020.

The second quarter collapse in GDP was “unprecedented,” the OECD said, and “significantly larger” than the 2.3% decline seen in the first quarter of 2009, which marked the worst three month period of the financial crisis.

The OECD and its partners represent 80% of global trade and investment, according to the organisation, underlining the importance of its figures.

The organisation said the huge second quarter GDP slump was driven by “COVID-19 containment measures across the world since March 2020.” Strict lockdowns led to shuttered factories and offices, declining global trade, and job losses around the world.

The worst slump was seen in the UK, where GDP shrank by 20.4% in the second quarter. In the US, GDP shrank by 9.5% and the eurozone economy contracted by 12.1%.

Britain suffered the worst slump of any developed nation in the second quarter. Photo: OECD
Britain suffered the worst slump of any developed nation in the second quarter. Photo: OECD

In its half-year report on the world economy in June, the OECD said global economic activity was expected to register an annual contraction of 6% in 2020. Global unemployment was forecast to reach 9.2%. The group said global GDP was unlikely to recover to pre-pandemic levels for at least two years.

“As restrictions begin to be eased, the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections,” the OECD said in June.

“With or without a second outbreak, the consequences will be severe and long-lasting.”

This week Germany decided to extend its state employment support scheme into 2021, while the UK is facing pressure to do the same. On Tuesday, UBS downgraded its forecasts for the UK economy this year, predicting a 10.1% contraction.