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(Bloomberg) – The global economic crisis will not be as acute as previously feared this year, although the recovery is losing momentum and will need the support of governments and central banks for some time, according to the OECD.

The world economy will contract 4.5% this year, down from the 6% projected in June, the Paris-based entity reported on Wednesday, improving its outlook in response to spikes in activity since quarantines ended.

There were big revisions for the United States and the eurozone, as well as for China, whose economy is now forecast to grow slightly, the only G-20 country with such an outlook.

The best outlook reflects the solid economic recovery in recent months and the large injection of public resources. The US unemployment rate fell more than expected in August, while China this week reported positive data for retail sales and industrial production.

While that initially strong rebound means that the 2020 figure looks a bit less bleak, the pace of the recovery is now slowing, and production in many countries will remain below its pre-crisis level through the end of 2021. Also there is a risk of lasting damage to economies, as well as bankruptcies and job losses.

Amid these dangers, the OECD indicated that governments and central banks should continue to provide support throughout 2021, after enormous efforts this year that have inflated balance sheets and the fiscal budget.

“The problem is that this V-shaped recovery is not going to happen,” declared OECD Secretary General Ángel Gurría on Bloomberg Television. “What we’re saying is don’t remove the support, don’t remove the relief too quickly.”

But he added that aid programs must evolve as growth increases, allowing money to be better used to protect businesses and jobs in sectors with a viable future. That echoes Monday’s comments from the Bank for International Settlements, which noted that the challenge is to support businesses without creating “zombie” companies that harm economies in the long run.

While the OECD improved the global outlook, it also made huge downward revisions for several emerging markets. India’s economy will contract 10.2% this year, almost triple the previous forecast, while Argentina, Mexico and South Africa will also be hit harder than forecast in June.

The OECD noted that there is still enormous uncertainty surrounding the outlook, and its latest projections assume continued sporadic outbreaks of the virus coupled with targeted local interventions. The new forecasts compare to its June “one-hit” scenario, which was based on a second wave of COVID-19 infections.

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