Russia's invasion of Ukraine immediately slowed recovery from the COVID-19 pandemic and put the world economy on a path of slower growth and rising inflation.
The Organization for Economic Co-operation and Development's latest economic outlook & # 8211; The OECD (Cyprus is not a member of the OECD, but the OECD makes estimates for the course of the eurozone) predicts that global growth will slow sharply to around 3% this year and 2.8% in 2023, much lower than expected. to the previous economic outlook of last December.
The OECD said in a statement that the economic and social impact of the war is stronger in Europe, with many of the countries hardest hit in Europe given exposure through energy imports and refugee flows.
High inflation erodes household incomes and expenditures, hitting vulnerable households particularly hard. The risk of a severe food crisis remains strong for the world's poorest economies due to the high risk of supply shortages and rising costs.
Further price increases food and energy and continuing supply chain difficulties are key drivers of higher consumer price inflation and remain high for longer than previously thought.
In some advanced economies, inflation is now expected to reach levels not seen since the 1970s. Cost pressures will begin to ease as the impact of rising interest rates begins to be felt by 2023. core inflation is still projected to remain at or above the targets of central banks in many large economies.
& # 8220; Countries worldwide are hit by higher commodity prices, which are raising inflationary pressures and cutting real incomes and spending, slowing recovery & # 8221 ;, said OECD Secretary-General Mathias Cormann at
& # 8220; This slowdown is directly attributable to Russia's unprovoked and unwarranted aggressive war, which is causing lower real incomes, lower growth and fewer jobs worldwide.
< p> Uncertainty
Uncertainty about prospects is high and is characterized by prominent downside risks. We do not know how long Russia's war against Ukraine will last and how much worse it can become.
Many low-income and emerging market economies will be hit even harder by rising food and energy prices Slowing demand growth in their export markets and the possibility of capital outflows as interest rates rise in advanced countries.
In addition, the pandemic is not over & # 8211; more aggressive or contagious variants may occur, and zero-shock policies in China may continue to disrupt supply chains.
& # 8220; The prospects are disappointing and people are already paying the price for Russia's aggression & # 8221 ;, said chief economist Laurence Boone. & # 8220; The choices made by policymakers and citizens will be crucial in determining how high this price will be and how the burden will be shared. Hunger is not a price people have to pay & # 8221 ;.
Greater international cooperation is needed to avoid a food crisis. Reducing export restrictions, which are raising world prices, stepping up efforts to transport goods outside Ukraine and targeted immediate assistance would help countries affected by the current disruption.
Protecting households low-income war costs must be an urgent priority for governments. However, the best policy choice to provide such support to mitigate the impact of higher prices is through interim, well-targeted and instrumentally controlled fiscal measures.
In most economies with healthy growth and employment, the level of inflation no longer justifies a accommodative monetary policy stance. The more widespread and consolidated inflation has become, the faster it should be lifted. Further increases in interest rates are likely to be needed in many emerging markets economies to help anchor inflation expectations and avoid destabilizing capital outflows.
The war reaffirmed the importance of energy security. Accelerating the transition to green energy will both improve energy security and help reduce carbon dioxide emissions. Regulatory and fiscal incentives may stimulate the drive for alternative energy sources, but investing in large-scale renewable energy sources will require copper, rare earths and other materials that are concentrated in a few countries. Open international trade is therefore essential to achieving transition and energy security.