OECD Warns Of Sharp Economic Slowdown Due To The War
The OECD, in its twice-yearly World Economic Outlook today, warned of the “hefty price” of taking a stance against Russia’s invasion, forecasting lower growth and high inflation, with poorer countries hit particularly hard.
The club of rich nations cut its global growth forecast for this year to 3 per cent, down from 4.5 per cent in December, even lower than the IMF’s recent estimate of 3.6 per cent. For 2023, growth would be still lower at 2.8 per cent.
The OECD expects inflation to average 8.5 per cent across the bloc in 2022 and 6 per cent in 2023, with energy price rises spreading out into other areas.
Russia and Ukraine are important suppliers in many commodity markets. Together they accounted for about 30 per cent of global wheat exports, 20 per cent for corn, mineral fertilisers and natural gas, and 11 per cent for oil. Prices for these commodities increased sharply after the onset of the war.
Without action, there is high risk of a food crisis. Supply disruptions are rising, particularly threatening low-income countries that are highly dependent on Russia and Ukraine for basic food staples, the OECD analysts stated.
The organisation warned against letting poor countries shoulder the burden of the war, particularly the threat to food supplies, a danger also highlighted today by Turkey’s foreign minister.
War Pushed 75million More People Into Extreme Poverty Than Expected In 2019
The OECD report follows yesterday’s Global Economic Prospects update from the World Bank, which highlighted the damage from the war to developing countries and the prospects of a debt crisis, with 75mn more people pushed into extreme poverty than expected in 2019.
It likened global conditions to those of the 1970s, when inflation led to steep interest rate rises and a global recession.