The world is paying a heavy price for Russia’s war in Ukraine. In addition to the thousands of deaths and the forced exile of millions of refugees, this conflict has also triggered a cost of living crisis, which is affecting people all over the world. Combined with China’s “zero Covid” policy, the war has set the global economy on a path of slowing growth and rising inflation. A situation unprecedented since the 1970s from which we are not about to emerge, according to the OECD.
The Organization for Economic Co-operation and Development (OECD) has just released its latest report on the global economic outlook. His predictions are simply chilling! Putting everything on the back of the Russian-Ukrainian war, the latter speak, in fact, of a slowdown in the recovery, of persistent inflationary tensions and even of the risk of famine induced by the crisis in the cost of living which saves almost no more. nobody.
Global growth at an average of 3% in 2022
In terms of economic recovery, the OECD report recalls that before the war, the world economy was well on the way to a solid, if uneven, recovery from the Covid-19 pandemic. The conflict in Ukraine and the disruption of supply chains, which containment measures in China, dictated by the “zero Covid” policy, have only exacerbated, are dealing a serious blow to this recovery. Thus, global GDP growth should slow down sharply this year, to stand at around 3%, and maintain this pace in 2023. Of course, this rate is well below the OECD projections last December.
Indeed, growth is expected to be significantly weaker than expected in most economies. And many of the hardest-hit countries are in Europe, a continent heavily exposed to war because of its energy imports and the influx of refugees. That being said, all over the world, countries are suffering from the rise in the cost of raw materials, which is only adding to inflationary pressures and weighing on both real incomes and expenditure, further hampering the recovery.
In short, according to the OECD, “the slowdown in growth is one of the prices to pay for this war: it will take the form of a reduction in income and employment prospects”.
Persistence tensions inflationary until 2023
Concerning the persistent inflationary tensions, the report is formal: “the war in Ukraine has destroyed the hope of a rapid end to the rise in inflation caused by the supply difficulties linked to Covid-19, observed in the world economy in 2021 and early 2022”. Explanations.
High food and energy prices and the continued deterioration of the supply chain situation will mean that consumer price inflation will not peak until later, and at a higher level. than originally planned.
In short, we are not yet out of the hostel! According to the OECD, the gradual easing of tensions in supply chains and commodity prices and the rise in interest rates should start to take their toll in the course of 2023, but underlying inflation should nonetheless remain at or above central bank targets in many developed economies at the end of the year.
Crisis risk eating
These persistent inflationary tensions, from which we are apparently not going to get out easily, risk having disastrous effects on certain populations. Indeed, the OECD points out that the sharp rise in prices is already eroding purchasing power and will force low-income households, everywhere in the world, to cut back on other items of expenditure to cover their basic needs in energy and in food. Worse, in the absence of any intervention, the risk of a food crisis is great.
Disruptions in supply chains are on the rise and particularly threaten low-income countries that are highly dependent on Russia and Ukraine for their basic foodstuffs. Given the state of their public finances – already strained by two years of pandemic – these countries could have difficulty supplying their populations with food and energy at affordable prices, thus exposing themselves to risks famine and social unrest.
Sami Nemli / ECO Inspirations
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