PARIS: The world economy will take a bigger hit than previously forecast next year due to the effects of Russia’s war in Ukraine, the OECD said on Monday.

In a bleak report titled “paying the price of war”, the Paris-based organisation noted that the conflict aggravated inflationary pressure when the cost of living was already rising quickly.

“The world is paying a very heavy price for Russia’s aggression against Ukraine,” OECD Secretary-General Mathias Cormann said in a news conference.

“Households and firms are suffering as costs rise and purchasing power is taking a hit,” Cormann said.

Covid outbreaks are still having an impact on the global economy while growth has also been affected by rising interest rates as central banks scramble to cool red-hot prices, the OECD said.

“A number of indicators have taken a turn for the worse, and the global growth outlook has darkened,” the Organisation for Economic Co-operation and Development said in the report.

Global growth stalled in the second quarter of this year and data in many economies “now point to an extended period of subdued growth”, the OECD said.

The organisation slashed its 2023 growth forecast for the global economy to 2.2 per cent, down from 2.8pc in its previous estimate in June.

“The central scenario is not a global recession, but risks have increased in the past few months,” said the OECD’s interim chief economist Alvaro Pereira.

To highlight the impact of Russia’s invasion of Ukraine, the OECD said global output in 2023 is now projected to be $2.8 trillion lower than previously estimated before the conflict in December 2021.

“This is the size of the French economy,” Pereira said.

The outlook for nearly all nations in the Group of 20 top economies was cut, except for Turkey, Indonesia and Britain, though the latter is forecast to have zero growth.

Growth in the United States — the world’s biggest economy — is forecast to slow to 0.5pc in 2023.

The growth forecast for China, whose economy has been hit by strict Covid lockdowns, was cut sharply for this year to 3.2pc while it was slightly lower to 4.7pc for 2023.

Germany is now expected to go into recession next year with Europe’s biggest economy now seen shrinking by 0.7pc -- a 2.4-percentage-point drop from the previous forecast.

The country’s economy has been hit the hardest in Europe as it has relied heavily on Russian supplies of natural gas, which Moscow has cut significantly in suspected retaliation to Western sanctions.

Published in Dawn, September 27th, 2022