Ukraine war could cut 1% off global growth: OECD

March 18, 2022 12:00 am | Updated 05:41 am IST - PARIS

It urges targeted govt. spending hikes

The Ukraine crisis could knock more than a percentage point off global growth this year and add two-and-a-half percentage points to inflation, the OECD estimated on Thursday, calling for targeted government spending increases in response.

Well-targeted increases in government spending by OECD countries of the order of 0.5% of GDP could reduce the war’s economic impact by about half without significantly adding to inflation, the Organisation for Economic Cooperation and Development said.

With Europe strongly dependent on Russian energy imports, the negative impact of the war to the euro zone economy could be as much as 1.4% while in the United States it would be about 0.9%, the OECD estimated in an analysis of the economic fallout of the war.

Although Russia and Ukraine make up only 2% of global GDP, they have an outsized impact on the energy and commodities markets as major producers of raw materials used in everything from catalytic converters for cars to fertilizers.

It added central banks should be prepared to intervene as necessary to keep financial markets functioning if major stress emerges.

The war could add two-and-a-half percentage points to inflation

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