The fallout from the war in Ukraine could cut global economic growth by “over one percentage point” in the first year after the invasion, the OECD said in a report Thursday.
The impact “if sustained” would produce “a deep recession in Russia, and push up global consumer price inflation by approximately 2.5 percentage points”, the Organization for Economic Cooperation and Development said in its report.
“The economic disruptions brought on by the conflict are large and are likely to continue into the future”, OECD Secretary-General Mathias Cormann said in a press conference.
The size of the shock would “depend in part on the duration of the war”, said the OECD, a group of developed economies.
It modified plans to publish its usual global economic forecasts in light of the high uncertainty sparked by Russia’s February 24 invasion of Ukraine, publishing instead an assessment of the economic consequences of the conflict.
Despite together only accounting for “about two percent” of the global economy, Russia and Ukraine’s importance as exporters of raw material, food and energy mean the impact is likely to be felt beyond their borders.
Growth in the eurozone risked being cut by up to 1.4 percentage points, according to the OECD.
The negative impact on the continent reflected the “relative strength of business and energy linkages”, it added.
Those countries “that have a common border with either Russia or Ukraine” would be particularly affected, while bearing the brunt of refugee flows from Ukraine.
Governments could mitigate the losses for the economy with “targeted fiscal support”, without fueling faster price rises too much.
The extra push to inflation comes at a time when the pace of price rises around the world is already elevated.
On Wednesday, the US Federal Reserve announced a quarter-point increase to its benchmark interest rate to respond to runaway inflation.
Most central banks should continue with their pre-crisis policies in the face of the uncertainty caused by the conflict, the OECD said.
It also warned against the risk of a “sharp increase in poverty and hunger”, particularly in developing economies, if supplies of wheat from Russia and Ukraine were to be cut off completely.