Yesterday the World Bank, today the Organization for Economic Co-operation and Development (OECD). Alerts are ringing everywhere. The global economy has slipped into stagflation, with the “stagnant growth” part of the word lurching dangerously into recession. Humanitarian crisis, cost of living crisis, food crisis… Global shocks are intensifying. The world is paying a high price for Vladimir Putin’s war against Ukraine.
This last sentence comes from the OECD. The organization has just revised downwards its growth forecasts in the wake of the Russian invasion. This senseless war will cost 1.5 percentage points of global GDP this year, the equivalent of 1.5 trillion US dollars. The OECD is now talking about growth around 3%, against 4.5% in its December forecast. Combined with China’s “zero COVID” policy, the war has set the global economy on a path of slowing growth and rising inflation — a situation not seen since the 1970s, she says.
Before it, the World Bank spoke of a growing risk of stagflation, “which would have deleterious consequences for both low-income and middle-income countries”. The institution brought back in the same breath its forecast for global growth, lowering it from 5.7% in 2021 to 2.9% this year, a target far lower than the 4.1% for 2022 forecast last January. And she estimates that due to the combined damage of the pandemic and war, the level of per capita income in developing countries will be almost 5% lower than the pre-COVID trend.
The World Bank has lowered its growth forecasts for 2022 in nearly 70% of emerging and developing economies—including most commodity-importing countries—and 80% of low-income countries. “The negative consequences of the war will overshadow the possible short-term positive effect of higher energy prices for some commodity exporters. »
But beyond the generalized deceleration in growth, inflation hurts even more. Especially since it is largely fueled by soaring energy and food prices, amplified by the continued deterioration of supply chains that has exacerbated China’s zero COVID approach. “The war in Ukraine has dashed hopes of a quick end to the rise in inflation caused by supply difficulties linked [à la] COVID-19”, notes the OECD, which fears a large-scale food crisis.
In a report on the international repercussions of this conflict filed on Wednesday, the United Nations speaks of the worsening of the consequences. “The impact of war on food security, energy and finance is systemic, severe and accelerating. For people around the world, war threatens to unleash an unprecedented wave of hunger and misery, leaving social and economic chaos in its wake,” warned UN Secretary-General António Guterres.
Thus, “94 countries, home to approximately 1.6 billion people, are seriously exposed to at least one dimension of the crisis (finance, food or energy) and unable to cope with it. Of these 1.6 billion [de personnes]1.2 billion or three quarters live in countries severely exposed and vulnerable simultaneously in all three dimensions”.
De-globalization?
Russia and Ukraine are important suppliers in many commodity markets. Together, these two countries accounted for around 30% of world wheat exports, 20% of corn, mineral fertilizers and natural gas exports, and 11% of oil exports, the OECD recalls. For its part, China accounts for 19% of all global production and plays a key role in the supply chains that fuel international trade.
In the annual raw materials guide Cyclopsincluding the 36e edition was published Wednesday in Paris, we remember that this global outbreak of raw materials and other industrial components illustrates “the questioning of the market” and “the end of happy globalization”.
What to say…