Paris, 25 August 2022 (TDI): Organization for Economic Cooperation and Development (OECD) has provided a road map for energy security as well as climate goals. The conflict in Ukraine has highlighted the need for dependable energy supplies.
🔙 to the latest #EconomicOutlook:
The war in #Ukraine has underlined the importance of reliable sources of energy. 💡How can we increase #EnergySecurity & meet #climate goals ❔
By reducing fossil fuel use & expand the supply of renewables. 👉 https://t.co/3d04vyb7Pf pic.twitter.com/UMQXbsoD03— OECD ➡️ Better policies for better lives (@OECD) August 24, 2022
Impact of the Russia-Ukraine conflict on economies worldwide
The cost of Russia’s conflict in Ukraine is being felt by the entire world. It is a humanitarian crisis that has killed thousands of people and displaced millions. The war has brought a global crisis at the expense of living.
Furthermore, the war has put the world economy on a path of slower growth and rising inflation. This results in a position not seen since the 1970s when combined with China’s zero-COVID policy.
Moreover, economic uncertainty is making life difficult for those with low incomes. It is also increasing major food security problems in the world’s poorest economies. This is mostly due to sharp rises in the cost of energy and food.
Adding to that, before the conflict, the global economy was expected to make a strong, if uneven, COVID-19 recovery. Hence, the supply chain interruptions brought on by shutdowns in China as a result of the zero-COVID policy and the situation in Ukraine are seriously hampering the recovery.
Besides this, the current forecast calls for a severe slowdown in global GDP growth this year, at about 3%, and for it to stay the same in 2023. This is much slower than the anticipated recovery speed in December.
Additionally, in almost all economies, projected growth is noticeably weaker than anticipated growth. Europe, which is heavily vulnerable to the war due to oil imports and refugee flows, is home to several of the worst-hit nations.
Along these lines, commodity price increases are having an impact on nations all over the world. This adds to inflationary pressures, reduces real wages and spending, and slows the recovery. Thus resultantly, after the war, there will be a halt in growth, which will result in lower wages and fewer job possibilities.
Inflation Pressures
According to the OECD predictions the war’s widespread and worldwide effects on rising prices. These prices have already risen to 40-year peak levels in the United Kingdom, Germany, and the United States.
Moving ahead, during 2023, supply chain and commodities pricing pressures should gradually ease off. Therefore, despite this, actual inflation is still expected to be at or over central bank goals in many advanced economies at the end of the year.
Inflation Risks
In several commodity markets, Russia and Ukraine play a significant role as suppliers. Altogether, they made up around 30% of the world’s exports of wheat, 20% of the exports of corn, fertilizers, and natural gas, and 11% of the exports of oil. After the conflict started, these commodities’ prices rose significantly.
A food catastrophe is also highly likely. Supply interruptions are becoming more frequent, endangering low-income nations which are heavily reliant on Russia and Ukraine for basic food necessities.
Furthermore, these nations may find it difficult to provide food and electricity to their inhabitants at reasonable prices due to the pandemic’s two-year economic burden. This may increase the likelihood of famine and societal unrest.
