"The Cost of War"… OECD Lowers Global Growth Forecast for This Year from 4.5% to 3%

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Daehyun] The Organisation for Economic Co-operation and Development (OECD) forecasted that the global economy will weaken sharply this year compared to earlier expectations, influenced by Russia's invasion of Ukraine and other factors.

According to the economic outlook report released by the OECD on the 8th (local time), the global real Gross Domestic Product (GDP) growth rate for 2022 is expected to slow sharply to 3%. It is also projected to be only 2.8% in 2023.

In December last year, the global economic growth rate for 2022 was forecasted at 4.5%, but it was revised downward by 1.5 percentage points following Russia's invasion of Ukraine.

This year’s economic growth forecasts for major countries are 2.5% for the United States, 2.6% for the Eurozone (19 countries using the euro), 4.4% for China, and 1.7% for Japan. The economic growth rate for the Group of Twenty (G20) is predicted to be 2.9% this year and 2.8% next year.

The OECD also significantly raised its inflation forecasts for member countries. This reflects ▲strong international commodity prices ▲prolonged supply chain disruptions ▲and the impact of the EU’s ban on Russian crude oil imports.

The OECD’s average inflation forecast was adjusted to 8.8% for this year and 6.1% for next year, which is 4.4 percentage points and 3.0 percentage points higher, respectively, compared to the December forecast.

The OECD diagnosed that the sharp rise in commodity prices is intensifying inflationary pressures and damaging real incomes and consumption. Furthermore, considering the dependence on agricultural exports from Russia and Ukraine, it analyzed that the risk of food shortages is high in many emerging markets.

The OECD stated that the major impact of Russia and Ukraine on the global economy is because both countries played important supplier roles in several commodity markets. They account for 30% of global wheat exports, 15% of corn, 20% of mineral fertilizers and natural gas, and 11% of oil.

Laurence Boone, the OECD Chief Economist, explained, "The world will pay a heavy price due to Russia’s war against Ukraine," adding, "Because Russia and Ukraine are major exporters of raw materials, this war has driven up energy and food prices, making life harder for many people around the world."

He continued, "How much further growth rates will decline and inflation will rise depends on how this war unfolds," and added, "If the war escalates or drags on, the outlook will worsen, especially in low-income countries and Europe."

This content was produced with the assistance of AI translation services.