The OECD’s annual economic growth forecast looks dismally grim this year.
The war in Ukraine this year will have its negative influence on economic growth worldwide, but also on inflation, with the process being extended next year as well, the Organisation for Economic Cooperation and Development has warned. In its most recent report on world economic prospects, the organisation did not rule out an aggravation of the situation, or the occurrence of other shocks capable of creating even more confusion as far as the present economic order is concerned.
OECD, which brings together 38 developed countries whose economy is expanding, worldwide, postponed its annual economic forecast report, usually published in March, because of Russia’s aggression on Ukraine which began on February 24, the reason behind the postponement being the uncertainty as regards the conflict’s evolution and economic aftermath.
OECD has predicted a 3 % economic growth at world level, as against the previous forecast, standing at 4.5 %. Next year, the economic growth is set to become even slower, standing at 2.8 % as compared to the initial 3.2 % forecast. Concurrently, inflation will definitely take its toll on economies and on the population’s purchase power, because worldwide, inflation is expected to stand at 8.5%, twice as much as compared to previous predictions. We’re witnessing the humanitarian crisis unfolding, a crisis leaving behind thousands of dead people, forcing millions of refugees to leave their homes and posing a serious threat to the economic recovery we have all been expecting after two years of pandemic, the report also shows. Russia and Ukraine’s major influence on world economy is provided by the two countries’ role as a supplier of raw material for several markets. All told, the two countries supply almost 30% of the export of wheat at world level, 15% of corn, 20% of fertilizers, minerals and natural gas, 11% of the export of oil. Then the supply chains at world level hugely depend on the Russian and Ukrainian export of rare metals and gas. The prices of all those raw materials have gone up after the war begun, all that with serious consequences on the economies of many countries. The sheer blocking of wheat exports could have as its aftermath a serious food crisis capable of causing real humanitarian catastrophes in some of the developing countries. Furthermore, the crisis of farm cultivations fertilizers will cause a poor farm yield, which will enhance the food crisis.
Hugely dependent on massive energy imports from Russia, the European Union will be the most affected by the consequences of the conflict at its borders. According to the OECD report, the Euro zone will have a 2.6 % growth this year, and of 1.6 % in 2023, as previously the OECD forecast pointed to a more than double economic growth.
A sudden prospective blocking of Russian gas deliveries to Europe, a constant growth of energy prices or the disturbance of supply chains could have devastating effects on European economies. The inflation skyrocketing could cause a sudden increase in interest rates to the central banks, posing an even more serious threat to the already feeble economic recovery, the report also shows.
(Mihai Pelin, Radio Romania International)
