The Organization for Economic Cooperation and Development (OECD) estimates that the war process that is taking place in Ukraine can subtract one percentage point from the rate of world economic growth.
“Before the outbreak of the war, most of the key macroeconomic variables were considered to return to normal during 2022 and 2023 (…) Although Russia and Ukraine are relatively small, in terms of production, they are large exporters of food, minerals and energy, and the war has caused considerable economic and financial shocks.
Although they did not accurately estimate where the GDP rate will be in 2022, the most recent projection released by them, in December, was of an annual advance of 4.5%.
In a first report on “The Economic, Social Impact and the political implications of the war in Ukraine”, the organization’s experts disaggregated the shock in the economies and estimated that it will subtract one point from GDP to the advanced ones and 1.5 points to the emerging ones. .
The GDP expectation for the emerging countries reflects the impact that the higher price of commodity imports will have, the increase in risk aversion and the deterioration of purchasing power.
These negative effects will not be offset by the advantages that some commodity producers will have from having high prices.
Just on Tuesday, the International Monetary Fund (IMF) mapped the regional impact that the persistence of the war would have, although it did not give any specific estimate.
The economic impact of the war for the euro zone is calculated at 1.4% in growth over the December estimate of a GDP of 4.3%; For the United States, 0.88% less than the 3.7% growth forecast for its economy this year is expected.
It is possible to absorb impact
In the document, the OECD economists considered that there are alternatives to receive the economic impact and cushion the blow.
One of them lies in increasing public spending by half a point of GDP, which will make it possible to halve the impact of the war.
To fund this increase in spending, they propose taxing the extraordinary profits that companies dedicated to the energy sector will obtain.
risk aversion
In the analysis, the OECD experts warned that the risk of Russia falling into a complete moratorium, as a result of the sanctions that have been imposed on it, “will lead to an escalation of risk aversion from emerging and developing economies.”
They clarified that the increase in rates may be slower in countries where underlying inflation remains low and the impact of the conflict is greater.
Hence the two specific recommendations that it addresses to central banks: focus on ensuring that inflation expectations remain well anchored and be vigilant in intervening in the market to ensure it works well, if the duration and magnitude of the events are prolonged.
They predict an increase in poverty and hunger
In the report, presented from the OECD headquarters in Paris, by the secretary general, Mathias Cormann, they warned that “the persistence of the armed conflict and its escalation can lead to economic crises in some countries, a sharp increase in poverty and hunger and has the potential to put further pressure on agricultural supply for years to come.”
The experts of the international organization estimate that the supply shock that is occurring and that has already increased the prices of commodities, imposes the risk that world inflation will increase by an additional 250 basis points.
To have the reference, it is enough to remember that in February, the inflation of the OECD countries registered an average variation of 7.2%, the highest for the group since 1991.
Refugees, charged to the treasury
In the analysis they explain that a major challenge is the human cost of war.
The population is seeking refuge in other countries, mainly women and children, and the receiving countries need resources to care for them.
“The humanitarian cost of war is high and growing. Around three million people have fled Ukraine in the first three weeks of the war and the number is likely to continue to rise.”
Caring for refugees from Ukraine will require spending on social assistance, housing, food provision, medical assistance, childcare and education. The spending challenge is unpredictable and depends on the duration of the conflict.
The OECD estimated that the cost of processing and accommodating asylum seekers during 2015 and 2016 due to the situation in Syria was between 10,000 and 12,000 euros per request.
The above would imply, with three million refugees, a cost in the first year of the war equivalent to 0.25% of the GDP of the euro zone.
The calculation was made for that region because clearly the countries most exposed to refugee migration are those closest to Ukraine, which are Hungary, Moldova, Poland, Romania and Slovakia.
It is estimated that the supply shock that is occurring and that has already increased the prices of commodities, imposes the risk that it will put pressure on world inflation.