The global economy will suffer the biggest peace-time downturn in a century before it emerges next year from a coronavirus-inflicted recession, the OECD said on Wednesday.

Updating its outlook, the Organisation for Economic Cooperation and Development (OECD) forecast the global economy would contract 6.0 per cent this year before bouncing back with 5.2 per cent growth in 2021 – providing the outbreak is kept under control.

However, the Paris-based policy forum said an equally possible scenario of a second wave of contagion this year could see the global economy contract 7.6 per cent before growing only 2.8 per cent next year.

“By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments,” OECD chief economist Laurence Boone wrote in an introduction to the refreshed outlook.

With crisis responses set to shape economic and social prospects for the coming decade, she urged governments not to shy away from debt-financed spending to support low-paid workers and investment.

“Ultra-accommodative monetary policies and higher public debt are necessary and will be accepted as long as economic activity and inflation are depressed, and unemployment is high,” Boone said.

As the threat of a second wave of contagion keeps uncertainty high, Boone said now was no time to fan the flames of trade tensions and governments should cooperate on a treatment and vaccine for the virus.

The U.S economy, the world’s biggest, is seen contracting 7.3 per cent this year before growing 4.1 per cent next year. In the event of a second outbreak, the U.S. recession would reach 8.5 per cent this year and the economy would grow only 1.9 per cent in 2021, the OECD said.

The OECD expects the Canadian economy to decline 8% in 2020 and recover to 3.9% growth in 2021. A second wave of infection this year would cause the economy to shrink 9.4% and grow only 1.5% in 2021.

Meanwhile, the euro area is heading for a downturn of 9.1 per cent this year followed by 6.5 per cent growth next year. But the recession could reach 11.5 per cent this year in the event of a second outbreak, followed by growth of 3.5 per cent in 2021.

Britain is expected to see the worst downturn among the countries covered by the OECD, with its economy forecast to contract 11.5 per cent this year before recovering 9.0 per cent next year. A second outbreak could trigger a slump of 14.0 per cent this year followed by a rebound of 5.0 per cent next year, the OECD said.