Russia's war in Ukraine will cause trade interference and block supply chains, slowing economic growth and increasing global prices, the Organization for Economic Cooperation and Development warned Thursday.
In a grim new report, organizations from 38 countries stated that their gross domestic product, the largest measure of economic output due to the conflict, will decrease by 1.08% worldwide, 1.4% in 19 European countries using the euro, and 0.88% in the United States.
However, the OECD pointed out that government spending and tax cuts could partially limit the damage.
The invasion of Russia occurred at a time of price increase and complications in the supply chain due to an unexpectedly strong recovery from the coronavirus recession. In December, the OECD predicted that global inflation will reach 4.3% this year, predicted that global prices will rise by 2.47% points next year due to the conflict.
Russia and Ukraine account for less than 2% of world GDP, but they are important producers of raw materials for concrete. For example, they both export a third of the world's wheat, causing fear that countries such as Egypt and Lebanon, which rely on cheap exports of wheat for bread and other basic foods, may suffer shortages in the coming months.
Russia is also the main producer of potassium used in fertilizers. Palladium, steel, and nickel used to make automotive batteries, which are important for automotive, mobile phones, and dental fillings.
The price of these products has skyrocketed since January.
Russia and its economy were hit hard by sanctions. The value of the ruble has plummeted, and Russian crude oil is being sold at great discounts on the world market.
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