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OECD cuts 2021 global growth outlook due to supply issues, inflation

People wearing face masks against coronavirus arrive at Saint Lazare train station in Paris, on Nov. 30, 2021. (AP Photo/Lewis Joly)

TOKYO (Kyodo) -- The Organization for Economic Cooperation and Development revised downward Wednesday its projection for this year's global economic growth, citing supply chain disruptions and inflation as well as the prolonged impact of the coronavirus pandemic.

    The world's gross domestic product will grow a real 5.6 percent in 2021, down 0.1 point from an earlier prediction in September, the OECD forecast in its latest economic outlook report, saying, "Health, supply constraints, inflation and potential policy missteps are all key concerns."

    "Shortages of semiconductors and other intermediate goods, delays in supplier delivery times and bottlenecks in shipping have hit production in many industries," the quarterly report by the Paris-based club of 38 mostly wealthy nations said, adding that the auto industry is one of the severely affected sectors.

    Due to the supply constraints along with the spread of the Delta variant of the coronavirus, output in the July-September period was "particularly weak in a number of Asia-Pacific economies, including Japan and Indonesia," according to the OECD.

    The report also said that "stronger and longer-lasting inflation pressures" have been seen across the world "at an unusually early stage" of its recovery phase of the economic cycle, with sharp rises in food and energy costs having large impacts on low-income households.

    The OECD left its estimate for GDP growth in 2022 unchanged at 4.5 percent, and expected a 3.2 percent increase in 2023. But "deadlier strains of the virus" could deal a heavy blow to the world economy if "pockets of low vaccination end up as breeding grounds" for them, it said.

    The projection came as nations are tightening their border controls following the outbreak of the new Omicron variant of the coronavirus, although the latest OECD report made no reference to it.

    First detected in South Africa last month, the Omicron variant is believed to be highly contagious, creating uncertainty about the global economic outlook.

    "With Omicron, there are new added uncertainties," said OECD Chief Economist Laurence Boone at a press conference. "No one quite knows much about that new variant, but this adds to the level of uncertainty."

    By nation, the OECD projected Japan will continue to see the worst economic growth among the Group of Seven advanced economies, growing 1.8 percent in 2021, down 0.7 point from the previous projection, 3.4 percent in 2022, up 1.3 point, and 1.1 percent in 2023.

    As well as reduced car production caused by the supply chain disruption, the government's latest state of emergency over a virus resurgence driven by the Delta variant, which "held back the recovery of consumption in mid-year," hit the economy, according to the report.

    Projections for the Chinese economy were also downgraded, as the OECD said the world's second-largest economy is expected to grow 8.1 percent in 2021, down 0.4 point, and 5.1 percent in 2022, down 0.7 point, amid concern over a possible default of real estate giant Evergrande Group. The estimated growth rate in 2023 is 5.1 percent.

    The United States was predicted to expand 5.6 percent in 2021, down 0.4 point, 3.7 percent in 2022, down 0.2 point, and 2.4 percent in 2023.

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