by Leigh Thomas
PARIS (Reuters) – Global growth will slow more than expected due to the fallout from Russia’s war in Ukraine, with the combination of inflation and the energy crisis threatening to trigger a recession in most developed economies, warns the OECD on Monday.
While the Paris-based organization still expects global growth to reach 3.0% this year, it only sees it at 2.2% in 2023, down from 2.8% in its previous forecast. in June.
The OECD (Organization for Economic Cooperation and Development) is particularly pessimistic for European countries, whose economies are most exposed to the crisis caused by the Russian invasion of Ukraine, but not much more optimistic for the United States. .
Global output is expected to be $2.8 trillion lower next year than the OECD predicted before the war in Ukraine began – equivalent to France’s GDP.
“Russia’s war of aggression against Ukraine has caused additional disruptions in commodity markets and has accentuated the rise in prices,” its secretary general, Mathias Cormann, told a press conference. .
“The war, the weight of high energy and food prices as well as the zero Covid-19 policy in China imply that growth will be weak and inflation higher and longer,” he said. added.
The OECD expects economic growth in the euro zone to decline from 3.1% this year to 0.3% in 2023, suggesting that the group of 19 countries sharing the single currency should grow at least part of next year into a recession – defined as two consecutive quarters of contraction.
The organization thus takes note of a situation that has deteriorated sharply since the virtual cessation of deliveries of Russian natural gas, while it still forecast in June a growth of 1.6% in the euro zone next year.
DARK FORECAST FOR GERMANY, LESS FOR FRANCE
The forecast is very gloomy for the German economy, very dependent on Russian gas, which the OECD expects to contract by 0.7% in 2023, while it was previously expected to increase by 1 .7%.
France should do better, with positive growth expected at 0.6% next year, still 0.8 percentage points less than it was in June, after 2.6 % this year (revised upwards by 0.2 point).
The OECD warns, however, that a worsening of the energy crisis could reduce European growth by an additional 1.25 percentage points, and increase inflation by 1.5 points, which would inevitably plunge the vast majority of countries in the region in recession for the whole of 2023.
The United States, which does not have the problem of dependence on Russian hydrocarbons, should also see its economy slow down under the effect of the hike in interest rates decided by the Federal Reserve to fight against inflation. While growth in the world’s largest economy is still expected to reach 1.5% in 2022, it could slip to 0.5% next year.
The OECD remains confident for the Chinese economy in 2023, still expected to grow by 4.9%. On the other hand, it lowered its forecast to 3.2% this year, against 4.4% previously, due to the confinements imposed by Beijing on several major cities as part of its “zero COVID” policy.
Despite this difficult situation, the OECD considers it necessary to continue to raise interest rates to curb inflation and expects them to exceed 4% next year in most developed economies.
The organization also invites governments that have put in place shields to limit the impact of inflation on households and businesses to favor temporary measures targeting the most fragile so as not to increase the weight of public debt.
(Reporting by Leigh Thomas, French version Tangi Salaün, editing by Kate Entringer)