Much higher inflation and weaker global growth predicted in latest OECD forecast

The economic fallout is most strongly felt in Europe. PHOTO: BLOOMBERG

PARIS (NYTIMES) - The drumbeat of bleak economic forecasts continued on Wednesday (June 8) as the Organisation for Economic Cooperation and Development (OECD) warned that Russia's invasion of Ukraine was fuelling rapid inflation and slowing global growth.

OECD secretary-general Mathias Cormann repeatedly emphasised that "we are not projecting a recession" at this time, but he acknowledged that risks to the forecast were on the downside and would worsen if the war dragged on.

The organisation, which represents 38 countries including most of the world's advanced economies, lowered its estimate of global growth to 3 per cent this year from the 4.5 per cent it predicted at the end of last year. It estimated that average inflation among OECD member nations was likely to run close to 9 per cent this year, double its previous forecast.

Many of the countries in the Baltic region are expected to fare worse, with double-digit inflation.

Looking at a chart detailing each country's growth during a news conference, OECD chief economist Laurence Boone referred to the "sea of red arrows" pointing downwards.

On Tuesday, the World Bank issued its own outlook with a slightly lower forecast of 2.9 per cent global growth this year.

Skyrocketing fuel and food prices, overwhelmed supply chains and pandemic-related closures, particularly in China, have aggravated the economic crisis.

China, which in recent decades has been an engine of growth, has now turned into an "engine of volatility", Mr Cormann said.

Both he and Ms Boone emphasised that the world was producing enough oil and grain to meet global demand. Wheat production over the past 12 months had, in fact, increased from the previous year, Mr Cormann said.

Ms Boone said that other oil-producing nations had the ability to replace any Russian oil taken off the market.

But the war, export controls, production limits, logistical tangles and other factors were preventing these essential commodities from reaching low-income and emerging countries that were most in need.

There is enough food, Ms Boone said. "The problem is getting it where it is needed at affordable prices," she added.

The economic fallout is most strongly felt in Europe. In Britain, a combination of high inflation, tax increases and moves by the central bank to raise interest rates is expected to result in zero growth next year after a rise of 3.6 per cent in 2022. Germany's economy, the largest in Europe, is expected to have lower than 2 per cent growth for the next two years. Poland, which has taken in millions of Ukrainian refugees, is forecast to have 4.4 per cent growth this year and 1.8 per cent the next.

In the United States, growth is expected to drop to 2.5 per cent this year and 1.2 per cent in 2023.

"The cost-of-living crisis will cause hardship and risks famine," OECD said in its report, echoing several warnings from other international organisations.

At the same time, the organisation underscored just how uncertain any forecast could be given the vagaries of war, pandemic and more.

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