Global growth may decelerate sharply to 3% this year and 2.8% in 2023, according to the latest OECD Economic Outlook released Wednesday.
This projection is much below the 4.5% recovery projected in its previous outlook, published in December.
The Paris-based policy forum said high inflation is consuming household incomes and spending, hitting vulnerable households particularly hard. The risk of a serious food crisis remains acute for the world’s poorest economies because of the high risk of supply shortages and elevated costs.
“Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery,” OECD Secretary-General Mathias Cormann said, during the presentation of the Outlook. “This slowdown is directly attributable to Russia’s unprovoked and unjustifiable war of aggression, which is causing lower real incomes, lower growth and fewer job opportunities worldwide.”
Meanwhile, the organization does not foresee relief from rising prices until next year; it projects inflation will peak at 8.5% this year in OECD countries and fall in 2023. However, core inflation is projected to remain at or above central bank target ranges in many major economies.
However, the OECD warns about the uncertainty around the outlook because of the Russia-Ukraine war and the pandemic, which is still prevalent. With more contagious variants and strict Covid policies in China, the supply chains may continue to get disrupted.
“The Outlook is sobering, and the world is already paying the price for Russia’s aggression,” said chief economist Laurence Boone. “The choices made by policymakers and citizens will be crucial to determining how high that price will be and how the burden will be shared. Famine is not a price the world should pay.”