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OECD slashes GDP prediction on Ukraine war and China’s zero-Covid policy

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The OECD has estimated that the global gross domestic product is approximately $90 trillion [or GDP] will reach 3% in 2022 — a 1.5 percentage point downgrade from a projection done in December.

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Organization for Economic Cooperation and Development is the latest international organization to lower its global growth predictions for this year.

The OECD estimates that global GDP will hit 3% in 2022 — a 1.5 percentage point downgrade from a projection done in December.

The Paris-based organisation said Wednesday that the invasion of Ukraine and the shutdowns of major Chinese cities due to China’s zero-COVID policies had created a new set negative shocks.

Russia’s incursion in Ukraine has huge ramifications for the global economy. However, China’s zero Covid policy also has a negative impact on global growth due to its importance in global supply chains and global consumption.

Tuesday’s announcement by the World Bank showed that its outlook on global growth was also more negative. The institution said global GDP would reach 2.9% this year — an estimate lower from its 4.1% forecast in January.

Wednesday’s report by the OECD indicated that it was partly due to deep declines in Russia or Ukraine.

The report stated, “But growth will be substantially weaker that expected in most countries, particularly in Europe, where an Embargo on Oil and Coal Imports from Russia has been incorporated into the projections for 2023.”

In late May, the European Union decided to place an oil embargo against Russia. This was after having agreed the month before to stop any further coal imports from Russia. It has relied heavily on Russian fossil energy sources and cuts to some of them overnight will have an important economic impact.

The United States and the eurozone, a 19-nation bloc that shares the currency, do not have much to be proud of in terms their economic outlook. According to the OECD, the US will see an increase of 2.6% and 2.5% respectively this year.

For emerging economies, the macroeconomic picture is more bleak. This is mainly because they will be most affected by food shortages.

According to the OECD, “In many emerging markets the risks for food shortages is high because of the reliance on agricultural products from Russia and Ukraine.” China’s growth is 4.4%, India 6.9%, and Brazil 0.6%.

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