The world economy will grow by 2.2% in 2023, the OECD estimated on Monday, which lowered its previous forecast by six tenths because of the “price of war” in Ukraine and the rise in interest rates to contain inflation.
“A loss of economic momentum is visible globally, but especially in Europe,” said the Organization for Economic Co-operation and Development (OECD), which keeps global expansion unchanged at 3% in 2022.
(Also read: Russia would take years to recover its economy after sanctions, according to report)
Russia launched an offensive in Ukraine on February 24 that has translated globally into higher energy and food prices for households and businesses, and a brake on economic expansion in a post-pandemic world.
The conflict, which looks set to be long-lasting following the mobilization of Russian reservists, will result in a loss of $2.8 trillion in global revenue in 2023, the Paris-based organization estimated.
“Inflationary pressures are becoming more widespread, with rising energy, transport and other costs,” says the OECD, which has revised global inflation upwards to 8.2% in 2022 and 6, 6% in 2023.
In addition to the effects of the war on prices, the rise in interest rates by central banks to contain inflation and the covid-19 pandemic are also weighing down the world economy, adds the OECD, which nevertheless asks to continue.
(It may interest you: Fed warns that stabilizing prices in the US ‘will take a while’)
The effect on the European Union
The economic situation would particularly hit the European Union (EU), region close to Russia and that seeks to reduce its dependence on Russian gas, and above all on its first economic and industrial power, Germany.
The OECD projected that Germany would enter a recession in 2023 with a contraction of 0.7%, a reduction of 2.4 points compared to June forecasts that weighs down the eurozone economy. The latter would grow by 0.3%, 1.3 points less than forecast.
“The projections are surrounded by great uncertainty. Greater fuel shortages, especially gas, could reduce expansion in Europe by a further 1.25 percentage points in 2023,” the report warns.
Although the rest of the main EU economies would escape the recession in 2023, France (+0.6%), Italy (+0.4%) and Spain (+1.5%) would not be spared from the consequences of a worsening energy situation.
“When Germany, France and other economies fall (…), there is an impact on the others,” the acting chief economist of the economic organization, the Portuguese-Canadian Álvaro Pereira, warned at a press conference.
(Also: Inflation in the euro zone marks a new record, but its economy resists)
Argentina, Brazil and Mexico
The G20 countries would grow next year at the same rate as the world economy, 2.2% (-0.6 points).
Of these, the OECD lowers the forecast for Argentina by 1.5 points, which would then grow by 0.4% and whose inflation would be 83%. In line with the International Monetary Fund (IMF), the organization, to which Argentina and Brazil asked to join, advances that the latter will grow almost two points more than expected in 2022, 2.5% in 2022, and 0, 8% in 2023 (-0.4).
Mexico, an OECD member country like Chile, Costa Rica and Colombia, follows the same trend as the South American giant with an expansion of 2.1% this year (+0.2 points) and 1.5% in 2023 ( -0.6 points compared to June).
We firmly believe that Russia is paying a very, very high price in the war.
The economic outlook for 2023 was also revised down in other areas and countries around the world, except for Turkey (3%, unchanged), the United Kingdom (0%, unchanged) and Indonesia (4.8%, plus 0 .1 percentage points).
(You can read: IMF raises growth outlook for Latin America and the Caribbean)
The growth of the United States would be 0.5% in 2023 (-0.7 points compared to June) and that of China 4.7% (-0.2). The Russian economy would contract by 4.5% in 2023, after a contraction of 5.5% in the current year.
“It’s a huge recession. The sanctions are having a big impact. We firmly believe that Russia is paying a very, very large price in the war,” Pereira stressed, when asked about the 4.5-point improvement in Russia’s forecast for 2022.
INTERNATIONAL WRITING
*With information from AFP and EFE
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