The war in Ukraine will continue to be expensive: the OECD has significantly downgraded its global growth forecast for next year in the face of the more lasting effects of the conflict than expected, with Europe paying the biggest bill.
“The world is paying a very high price for Russian aggression in Ukraine,” Organization for Economic Co-operation and Development Secretary-General Mathias Cormann told a press conference on Monday.
“Households and businesses are hurting,” he continued, pointing out that “the burden of higher energy and gas prices as well as China’s zero COVID policy imply lower growth and higher inflation. high and persistent.
The lack of calm on the ground in the eighth month of the Russian invasion of Ukraine, symbolized by the recent mobilization of reservists by Moscow, encourages the international organization based in Paris to be pessimistic.
In its quarterly report, entitled “Paying the price of war”, the OECD predicts that after a difficult year 2022, especially due to the surge in inflation, “global growth should continue to weaken in 2023”.
The OECD expects global GDP to grow by 2.2% against 2.8% expected in June, although it maintained its forecast for 2022 at 3% after having reduced it sharply in recent months.
“Inflationary pressures are increasingly broad-based, with rising energy, transport and other costs impacting prices,” writes the OECD, which has revised down its 2023 forecast for the near future. all of the G20 countries with the exception of Turkey, Indonesia and the United Kingdom, whose economic activity will stagnate.
2800 billion
To show the extent of the shock of the war, the OECD has assessed the financial losses to be expected next year at 2.8 trillion dollars compared to estimates prior to the arrival of tanks in Ukraine, “the size of the “French economy” measured in annual GDP, indicated the institution’s acting chief economist, Alvaro Perreira.
It is logically the neighboring countries of kyiv and Moscow that will suffer the greatest costs: growth in the euro zone is subject to the greatest revision, to 0.3% against 1.6% expected in June. Inflation is expected there this year at 8.1% and 6.2% next year.
Agitated for months as a major risk, recession is the scenario adopted by the OECD for Germany: according to the OECD, the leading European economy would see its GDP fall by 0.7% next year, a plunge of 2 .4 points compared to the previous forecast.
Its main neighbors escape it: growth of 0.4% is expected in Italy, 1.5% in Spain, and 0.6% in France, where the government is still counting on 1%.
The International Monetary Fund predicted in its latest global panorama 0.8% growth in Germany, 1% in France and 1.2% in the euro zone, but it could revise its figures downwards in October.
Among the other major regions, US growth is expected by the OECD at 0.5% against 1.2% expected in June, and Chinese growth at 4.7% against 4.9%.
“Significant uncertainty”
“There is significant uncertainty surrounding these economic projections,” concedes the OECD, given the risk of energy shortages during the winter.
The dizzying rise in prices is already threatening the activity of a growing number of companies.
According to the OECD, greater gas shortages than expected could, through a cascading effect, reduce euro zone GDP by an additional 1.25 points next year, pushing many states into recession.
This scenario is all the more worrying as the central banks of developed and emerging countries are firmly committed to raising their interest rates to contain inflation, with the risk of undermining growth there too.
Rate hikes are “a key factor” in the slowdown at work, notes the OECD, which calls on central bankers to continue, however.
War, rate hikes, COVID-19, debt crisis… The OECD lists in its forecasts all the risks surrounding the economy. From there to lead to a plunge in global GDP? “The central scenario is not a global recession but the risks have increased in recent months,” conceded Alvaro Pereira.
Targeted and temporary fiscal measures aimed at households and businesses are part of the solution to the emergency, the institution underlines, affirming that so far the measures taken against the rise in energy prices have been “poorly targeted because often benefiting too many households and businesses.