Global economic growth has lost momentum in the wake of Russia’s war of aggression in Ukraine, which is slowing growth and putting further upward pressure on inflation around the world. This is what the last one says Interim Economic Outlook of the OECD.
The Organization for Economic Co-operation and Development has revised the estimates of global growth to a modest 3% in 2022, before slowing further down to just the 2,2% in the 2023. This is well below the pre-war rate of economic growth and represents approx 2.8 trillion dollars of global production expected in 2023.
Furthermore, according to the Outlook, the war in Ukraine has further pushed up energy prices, especially in Europe, exacerbating inflationary pressures at a time when the cost of living was already rising rapidly across the country. world due to the persistent impacts of the Covid-19 pandemic. Businesses in many economies are experiencing higher energy, transportation and labor costs, inflation is reaching levels not seen since the 1980s, forcing central banks to tighten monetary policy settings faster than expected.
OECD, growth estimates revised downwards, the numbers
According to the OECD Outlook, inflation and the energy supply shock resulting from the war led the organization to revise its previous global growth projections downwards. Annual GDP growth is expected to slow to around 1/2% in the United States in 2023 and 1/4% in the euro area, with risks of deeper declines in several European economies during the winter months. Also in Chinese growth has been hit and is expected to drop to 3,2% in 2022. Except for the 2020 pandemic, this will be the lowest growth rate in China since the 1970s. According to forecasts, the economy iitalian should grow by 3,4% in 2022 and 0,4% in 2023.
Inflation is expected to gradually decline over the course of 2023 in most G20 countries as tighter monetary policy comes into effect and global growth slows. Inflation overall is expected to decline from 8.2% this year al 6,6% in 2023 in economies of the G20 and get off dal 6,2% of this year to 4% in 2023 in the advanced economies of the G20.
“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to a prolonged slowdown, ”said the OECD Secretary General. Mathias Cormann during an Outlook presentation. “The inflationary pressures that were already present when the global economy emerged from the pandemic have been severely exacerbated by the war. This has further pushed the rise in energy and food prices that now threaten the living standards of people around the world ”.
The OECD reports substantial uncertainty about the economic outlook, with significant downside risks. These include the possibility of further increases in food and energy prices, which could push many people into poverty, as well as the possibility of gas shortages as winter advances in the Northern Hemisphere. Reducing energy consumption and diversifying sources of supply will be essential to avoid shortages, which would raise global energy prices, damage confidence and likely worsen financial conditions and require a temporary period of forced reduction in gas consumption by companies. It is stated in the OECD Outlook.
Taken together, these shocks could reduce the growth of European economies by more than 1¼ percentage points in 2023, compared to the central Outlook projection, and increase inflation by more than 1½ percentage points. This would push many countries into a full-year recession in 2023, while GDP growth would also weaken in 2024.
Real estate market and the “Zero Covid” policy risks for Chinese growth
Other key risks are that the adjustments being made in the Chinese real estate markets – combined with the high level of corporate debt in China and the continuation of the policy “zero Covid” of the country – could generate a more severe slowdown than expected in the second largest economy in the world. This risk adds to the ongoing costs of pressures on the global supply chain and possible debt crises and financial contagion in many emerging market and low-income economies.