The drumbeat of gloomy economic forecasts continued as Wednesday Organization for Economic Cooperation and Development warned that the Russian invasion of Ukraine is slowing global growth and fueling inflation.
Mathias Cormann, the organization’s general secretary, has repeatedly stressed that “we are not projecting a recession” at this time, but acknowledged that the risks to the forecasts are downward and that they would get worse if the war drags on.
The organization, which represents most of the world’s advanced economies, has lowered its global growth estimate to 3% this year from 4.5% projected late last year. He estimated that average inflation among member countries would likely be close to 9% this year, double the previous forecast.
Many of the Baltic countries are expected to do worse, with double-digit inflation.
Looking at a graph detailing each country’s growth at a press conference, chief economist Laurence Boone referred to the “sea of red arrows” pointing downward.
World Bank Tuesday issued its own outlookwith a slightly lower forecast of 2.8% global growth this year.
Soaring fuel and food prices, overloaded supply chains and Covid-related closures, particularly in China, have exacerbated the economic crisis.
China, which has been an engine of growth in recent decades, has now transformed itself into an “engine of volatility,” Cormann said.
Both he and Ms. Boone pointed out that the world produces enough oil and grain to meet global demand. In fact, wheat production in the past 12 months has increased from the previous year, Cormann said. And other oil-producing nations have had a chance to replace any Russian oil withdrawn from the market, Ms. Boone said. But war, export controls, production limits, logistical tangles and other factors prevented these essential goods from reaching the emerging, low-income countries that need them most.
There is enough food, Ms. Boone said, “the problem is getting it where it is needed at affordable prices.”
The economic repercussions are most felt in Europe. In Britain, a combination of high inflation, tax hikes and central bank moves to raise interest rates are expected to lead to zero growth next year after a 3.6% increase in 2022. The economy is expected to Germany, the largest economy in Europe have growth of less than 2% for the next two years. Poland, which has welcomed millions of Ukrainian refugees, is expected to have 4.4. per cent growth this year and 1.8 per cent next.
In the United States, growth is expected to drop to 2.5% this year and 1.2% in 2023.
“The cost of living crisis will cause hardship and risk famine,” the report said, echoing many other similar warnings from other international organizations. At the same time, the organization stressed how uncertain any forecast can be given the vagaries of war, pandemic and more.