OECD projects global economic growth to decelerate sharply to around 3% this year and 2.8% in 2023, well below the recovery estimated in its previous economic outlook last December.
The economic and social impact of the war is strongest in Europe, with many of the countries hardest hit in Europe, given exposure through energy imports and refugee flows, OECD noted.
High inflation is eroding household incomes and spending, hitting vulnerable households particularly hard, OECD said, adding that the risk of a serious food crisis remains acute for the world’s poorest economies because of the high risk of supply shortages and elevated costs.
Further increases in food and energy prices and persisting supply-chain bottlenecks are key factors causing consumer price inflation to peak at higher levels and remaining high for longer than previously projected, OECD observed.
In some advanced economies, inflation is now expected to reach levels not seen since the 1970s, the organisation said.
Cost pressures should start to ease with the impact of rising interest rates beginning to be felt through 2023, OECD added.
However, core inflation is still projected to remain at or above central bank target ranges in many major economies, OECD warned.
“Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery,” OECD Secretary-General Mathias Cormann said during the presentation of the outlook. “This slowdown is directly attributable to Russia’s unprovoked and unjustifiable war of aggression, which is causing lower real incomes, lower growth and fewer job opportunities worldwide.”
Uncertainty around the projections of global economic growth is high, marked by prominent downside risks, according to OECD.
“We don’t know how much longer Russia’s war against Ukraine will last and how much worse it may get,” the organisation pointed out.
Furthermore, the pandemic is not over — more aggressive or contagious variants may emerge, and zero‑Covid policies in China may continue to disrupt supply chains, OECD said.
“The Outlook is sobering, and the world is already paying the price for Russia’s aggression,” said Chief Economist Laurence Boone said. “The choices made by policymakers and citizens will be crucial to determining how high that price will be and how the burden will be shared. Famine is not a price the world should pay.”