OECD cuts forecasts into 2023, with Ukraine crisis cited as growth drag
The Organization for Economic Cooperation and Development, or OECD, on Wednesday marked down global economic growth for the coming two years, citing the Russia-Ukraine conflict as a major cause.
The OECD now forecasts that global expansion will decelerate sharply to around 3 percent this year and 2.8 percent in 2023, both well below the recovery projected in its last Economic Outlook report released in December.
The Paris-based organization expects inflation to average 8.8 percent this year across its 38 members, which include some of the biggest economies. It said that in some advanced economies, inflation is now expected to reach levels not seen since the 1970s, as is already the case in Germany, the United States and the United Kingdom.
China's economy is expected to grow 4.4 percent in 2022 and 4.9 percent in 2023, according to the OECD.
"Amid mounting headwinds, growth will be supported by investment in the climate transition and the frontloading of infrastructure projects," the report said.
It also said that real estate investment in China will remain weak, but exports will remain relatively strong. And China's large oil and grain reserves will mitigate the impact of rising global energy and food prices.
The OECD marked down the US'GDP growth to 2.46 percent for 2022 from the 3.73 percent in its December forecast. Inflation in the US will hit 5.9 percent compared to the 4.4 percent in the December forecast.
The organization said that the economic and social impact of the conflict is strongest in Europe, reflecting vulnerabilities with costlier energy imports and refugee flows.
The European Union, the largest client of Russian energy, announced it would phase out Russian coal imports in August while imposing a partial ban on Russian oil by the end of the year.
Real GDP growth in the 19-member eurozone is expected to be 2.6 percent this year and 1.6 percent in 2023.
OECD Secretary-General Mathias Cormann said he is not forecasting a recession but slower growth.
"Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery," he told a news conference for the latest report.
He described the Russia-Ukraine conflict as resulting in "lower real incomes, lower growth and fewer job opportunities worldwide".
The OECD said that uncertainty around the outlook is high, with prominent downside risks and it's hard to tell how much longer the conflict will go on and how much worse it may get.
Many low-income and emerging-market economies will be challenged even more by rising food and energy prices, slower demand growth in their export markets, and the potential for capital outflows as interest rates rise in the advanced countries, the OECD said. It cautioned that the COVID-19 pandemic is not over and more aggressive or contagious variants may emerge.
"The outlook is sobering," said OECD Chief Economist Laurence Boone, adding that the world is already paying a price for the Russia-Ukraine conflict. "The choices made by policymakers and citizens will be crucial to determine how much higher that price will be and how the burden will be shared. Famine is not a price the world should pay."
Asked by China Daily whether Western sanctions on Russia have a negative impact on the global economic growth and supply chains, both Cormann and Boone dodged the question and instead emphasized that sanctions are effective in hurting the Russian economy.
The OECD forecast came a day after the World Bank marked down global economic growth to 2.9 percent this year, down from the 4.1 percent it forecast in January.