Value of Ukraine Conflict will have an effect on world economic system in 2023, says OECD

The world economy is expected to grow by 2.2% in 2023, announced this Monday (26) the OECD (Organization for Economic Co-operation and Development), which reduced the previous June forecast by 0.6%, a consequence of the cost of the Ukrainian War and the increase in interest rates to contain inflation.

“A loss of economic stimulus is visible globally, but particularly in Europe,” the OECD said in its “Paying the price of war” report, which leaves its forecast of 3% world growth unchanged for 2022.

On February 24, Russia launched an offensive in Ukraine, which caused energy and food prices to rise for households and businesses, as well as a brake on economic expansion in a post-pandemic world.

The conflict, which appears to be going on for a long time after the mobilization of Russian reservists, will result in a loss of US$2.8 trillion in world revenues in 2023, the Paris-based organization calculates.

“Inflationary pressures are increasingly widespread, with rising energy, transport and other costs that are transferred to prices,” highlights the organization, which raised its global inflation forecast to 8.2% in 2022 and 6, 6% in 2023.

In addition to the effects of the price war, the increase in interest rates by Central Banks to contain inflation and the consequences of the Covid-19 pandemic also affect the world economy, adds the OECD, which however defends the continuity of the measures.

Germany in recession

The economic situation should particularly affect the EU (European Union), a region close to Russia that is trying to reduce its dependence on gas from Russian territory, and above all the main economic and industrial power of the bloc, Germany.

The OECD projects Germany, which will enter recession in 2023, with a contraction of 0.7%, down 2.4 points from the June forecasts weighing on the eurozone economy. The latter would grow 0.3%, 1.3 points below the previous estimate.

“Projections are surrounded by great uncertainty. A greater shortage of fuel, especially gas, could reduce expansion in Europe by another 1.25 percentage points in 2023,” the report warns.

While the rest of the EU’s main economies will escape recession in 2023, France (+0.6%), Italy (+0.4%) and Spain (+1.5%) would not be spared the consequences of a worsening situation. energetic.

“When Germany, France and other economies fall […] there is an impact on others”, warned the interim chief economist of the economic organization, Álvaro Pereira.

Argentina, Brazil, Mexico

The G20 countries will advance in 2023 at the same pace as the world economy (2.2%), after a 0.6 point reduction in the outlook for the group compared to June.

In this group, the OECD reduced its forecast for Argentina by 1.5 points, which should grow 0.4% next year, with an inflation of 83%.

In line with the forecasts of the International Monetary Fund (IMF) in July, the organization, which received the application for membership from Brazil, projects that the country will grow much more than initial forecasts, 2.5% in 2022, almost two points above of the June estimate. The country should advance 0.8% in 2023 (-0.4 point compared to the previous forecast).

Mexico, which is already a member of the OECD, follows the trend of Brazil with growth of 2.1% (+0.2) this year and 1.5% (-0.6 compared to June) in 2023.

The economic outlook for 2023 was also revised downwards in other regions and countries, except for Turkey (3%, unchanged), UK (0%, unchanged) and Indonesia (4.8%, 0.1 point higher).

The growth of the US economy would be 0.5% in 2023, seven tenths less than in the previous forecast, and that of China 4.7% (-0.2).

After a calculated contraction of 5.5% in 2022, the OECD lowered the estimate for next year in Russia, which is expected to register a negative result of 4.5% in 2023.

“It’s a huge recession. Sanctions have a big impact. We believe that Russia is paying a very high price in the war”, highlighted Pereira.

(AFP)