Major economies are in recession as Ukraine war slows growth, says OECD | Jobs

According to the Organization for Economic Co-operation and Development (OECD), the world’s major economies are slipping into recession as the global energy and inflation crises triggered by Russia’s invasion of Ukraine have slowed growth more than previously expected. increase.

Heavy industry and reliance on expensive gas for home heating will plunge Germany, Italy and the UK into a prolonged recession.

The global economy will need to grow by around 4% to keep up with population growth, and the OECD says many countries will have lower per capita incomes.

Alvaro Pereira, interim chief economist at the OECD, said the world is paying a heavy price for the war in Ukraine and Russia’s decision to limit access to gas supplies, which is tougher than predicted in June. .

He said the government needs to encourage households and businesses to consume less gas and oil to survive the harsh winter.

Pereira also supported the central bank’s decision to raise interest rates to keep inflation in check. “We need to reduce demand. There is no doubt about it. And monetary and fiscal authorities need to work together to achieve that,” he said.

China’s growth is expected to fall to 3.2% this year, the lowest since the 1970s, and trade with neighboring South Korea, Vietnam and Japan will drop sharply, weakening its growth potential. .

China’s recovery next year will be weaker than expected, at 4.7%, according to the OECD.

But the Paris-based policy forum was most alarmed by the prospects for Europe as a whole, which is most directly exposed to the effects from Russia’s war in Ukraine.

The OECD expects flat UK GDP growth in 2023. However, this forecast does not take into account the measures announced in his Kwarten Prime Minister’s mini-budget on Friday.

The OECD expects eurozone growth to slow from 3.1% this year to just 0.3% in 2023. This means many countries in the 19 member currency zones will be in recession for at least part of the year. A recession is defined as two consecutive quarters of contraction.

France could escape recession with 0.8% growth next year, as predicted by the OECD, but will struggle like the rest of Europe after GDP growth has fallen by 1.3 percentage points since June. increase.

Russia will contract at least 5.5% this year and 4.5% in 2023. Berlin’s reliance on Russian gas before the invasion means the German economy will contract by 0.7% next year, down from an estimated 1.7% growth in June.

The OECD has warned that further disruptions in energy supply will hurt growth and boost inflation, especially in Europe. In Europe, activity could fall another 1.25%, inflation could rise his 1.5%, and many countries could slip into recession in his 2023 full year.

Global production next year is projected to be $2.8 trillion (2.6 trillion pounds) lower than the OECD forecast before Russia attacked Ukraine. This is a global income loss equivalent to the UK economy.

“The global economy has lost momentum as a result of Russia’s unprovoked, unjust and illegal war of aggression against Ukraine. GDP growth has stalled in many countries and economic indicators show a prolonged slowdown. said Matthias Koemann, the organization’s executive director.

A revised outlook for the U.S. shows that growth is likely to slow this year and recession for part of 2023, but that it remains more dependent on energy from Russia and other sources than other countries. low, with a strong recovery expected in 2024. .

The OECD expects the world’s largest economy to slow to just 0.5% next year from 1.5% this year, down from June forecasts of 2.5% in 2022 and 1.2% in 2023.

World Bank officials are urging central banks to refrain from the competitive rate hikes that would push the global economy into recession and hurt developing economies the hardest.

Nonetheless, the OECD said further rate hikes were needed to combat inflation and forecast most major central bank policy rates to reach at least 4% next year.