analysis
OECD: Ukraine war affects global growth
Stopping wheat exports from Russia and Ukraine will lead to bottlenecks in many emerging and developing countries. Photo: Vitaly Timkiv/AP/dpa
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The OECD sees global growth endangered by the Ukraine war. According to an analysis, supply bottlenecks could lead to economic crises, poverty and hunger.
According to an analysis by the OECD, the association of industrialized countries, global growth could shrink by more than one percentage point as a result of the war in Ukraine.
In addition, global inflation could increase by almost 2.5 percentage points in the first full year after the conflict began, the Organization for Economic Co-operation and Development (OECD) said on in Paris. The impact of the shocks varies from region to region, with European economies overall being hardest hit – particularly those that share a border with Russia or Ukraine.
Russian energy exports to the EU could fail
A major economic risk is that energy exports from Russia to the EU could fail completely. If this resulted in a permanent return to wartime prices, it would add another 1.25 percentage points to inflation in Europe, for a total of more than 3.5 percentage points. In this case, European growth would fall by more than 0.5 percentage points, according to the OECD analysis.
As a further consequence of the war, in addition to the acute danger of economic crises in some countries, there is also that of humanitarian catastrophes with a sharp increase in poverty and hunger, the OECD explained. Stopping wheat exports from Russia and Ukraine will lead to bottlenecks in many emerging and developing countries. Due to the interruption in fertilizer production, there is a risk that the interruptions will last longer because the agar supply will come under pressure in the next few years. Many countries in the Middle East depend on wheat from Russia and Ukraine for around 75 percent.
Refugees: EU support for key host countries
One challenge is coping with the flow of refugees from Ukraine. In the first year, taking in three million refugees could lead to direct costs of at least 0.25 percent of gross domestic product (GDP) in the EU, and even much more in the large host countries. Although the initial costs are manageable for the EU as a whole, they are difficult to afford for the individual neighboring countries. Therefore, the OECD advised EU support for the most important receiving countries.
The OECD named a possible fragmentation of the payment systems and changes in the currency composition of the foreign exchange reserves as long-term consequences. The SWIFT exclusion of Russian banks could speed up the development of alternatives. This would reduce the efficiency gains from a single global system and potentially reduce the US dollar’s dominant role in financial markets and international payments.