By Lee Thomas
PARIS (Reuters) – Global economic growth is slowing more than expected a few months ago in the wake of Russia’s invasion of Ukraine, the Organization for Economic Co-operation and Development said on Monday, as energy and inflation crises risk deteriorating into a recession in major economies.
The Organization for Economic Co-operation and Development said that while global growth this year was still projected at 3.0%, it is now expected to slow to 2.2% in 2023, revised down from a forecast in June of 2.8%.
The Paris-based policy forum has been particularly pessimistic about the outlook in Europe โ the economy most directly exposed to the fallout from the Russian war in Ukraine.
Next year’s global output is now expected to be $2.8 trillion less than the Organization for Economic Co-operation and Development forecast before Russia attacked Ukraine – a worldwide loss of income the size of the French economy.
โThe global economy has lost momentum in the wake of Russiaโs unprovoked, unjustified and illegal war of aggression against Ukraine,โ OECD Secretary-General Matthias Kormann said in a statement. โGDP growth has stalled in many economies and economic indicators point to a prolonged slowdown.โ . .
The Organization for Economic Co-operation and Development has forecast that economic growth in the eurozone will slow from 3.1% this year to just 0.3% in 2023, meaning the 19-nation common currency bloc will spend at least part of the year in recession, defined as two consecutive quarters of contraction. .
That represented a significant downgrade in the credit rating from the latest OECD economic forecast in June, when it forecast the eurozone economy would grow by 1.6% next year.
The Organization for Economic Co-operation and Development has been particularly bleak about the German economy that is dependent on Russian gas, forecasting it to contract 0.7% next year, down from June’s estimate of 1.7% growth.
The Organization for Economic Co-operation and Development has warned that further disruptions to energy supplies will hurt growth and boost inflation, especially in Europe where it could restore activity another 1.25 percentage points and raise inflation by 1.5 percentage points, pushing many countries into recession for the whole of 2023.
“Monetary policy will need to continue to tighten in most major economies to permanently cool inflation,” Corman told a news conference, adding that fiscal stimulus from governments was also key to restoring consumer and business confidence.
“It is very important that monetary and fiscal policy work hand in hand,” he said.
Although the US is less dependent on imported energy from Europe, it has been seen sliding into deflation as the US Federal Reserve raises interest rates to control inflation.
The Organization for Economic Co-operation and Development forecast the world’s largest economy will slow from 1.5% this year to just 0.5% next year, down from June’s forecast of 2.5% in 2022 and 1.2% in 2023.
Meanwhile, the strict measures taken by China to control the spread of COVID-19 this year mean that its economy was set to grow by only 3.2% this year and 4.7% next year, while the Organization for Economic Cooperation and Development previously expected 4.4% in 2022 and 4.9% in 2023.
Despite the rapidly deteriorating outlook for major economies, the Organization for Economic Co-operation and Development said more rate hikes are needed to combat inflation, and forecast rates at most major central banks will exceed 4% next year.
With many governments increasing support packages to help families and businesses deal with high inflation, the Organization for Economic Co-operation and Development said such measures should target those who need them most and be temporary to reduce their cost and not increase the burden of high debt after the coronavirus. .
