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Consumer in a US supermarket: Inflation is expected to remain high in 2023
Photo: Richard B. Levine / IMAGO
The OECD takes a much more skeptical view of the global economy because of the Ukraine war and its consequences.
According to the Organization for Economic Cooperation and Development (OECD), the world economy will only grow by three percent in 2022, which is significantly slower than the 4.5 percent expected in December.
The global economy is likely to pick up by 2.8 percent next year, after previously expected 3.2 percent.
Inflation is expected to rise to 8.5 percent in OECD countries this year and ease off to 6.0 percent in 2023.
The group of industrialized countries expects the German economy to grow by 1.9 percent this year, compared to around four percent expected by the OECD in December.
In 2023 it should be 1.7 percent.
Although there are numerous downside risks, the industrialized nations organization has not yet assumed that a recession is imminent.
However, a quick relief from the rising costs is unlikely.
Only in 2023 are consumer prices in the OECD countries likely to fall somewhat, still at an impressive 6 percent.
Despite these prospects, the OECD sees only a limited risk of “stagflation”.
In such a situation of stagnant economic growth and skyrocketing consumer prices, unemployment could also rise sharply.
There was a corresponding development in the mid-1970s in the course of the oil price shock.
Social partners must share the costs, but avoid spiraling wage prices
The developed economies are now much more service-oriented and less energy-intensive than in the 1970s, they say.
Central banks would have more leeway to fight inflation, independent of governments more concerned about tackling unemployment.
“To mitigate the cost of inflation, the burden must be shared between profits and wages.
That means employers and employees have to negotiate to share these costs fairly and avoid a wage price spiral,” said OECD chief economist Laurence Boone.
According to the OECD, there is strong evidence that monetary stimulus needs to be phased out in highly inflationary economies such as the United States and Eastern Europe.
The prospects are sobering, Boone said.
"Russia's attack on Ukraine is already costing the world dearly." Exactly how expensive and how the burden is shared depends heavily on the decisions made by politicians and citizens.
"We must not accept famine at any price."
Read an in-depth interview with Boone here
: »Food isn't getting where it's needed.«
The OECD attributes the fact that the economy is collapsing directly to Russia's unprovoked and unjustifiable war of aggression.
This affects "real income, growth and employment prospects worldwide," said OECD Secretary General Mathias Cormann.
"Higher commodity prices are hitting countries around the world, adding to inflationary pressures, squeezing real incomes and spending, and slowing recovery."
Growth in the euro zone twice as strong as previously assumed
According to the latest figures from Eurostat, there has been comparatively little sign of the impending downturn in the euro area, at least so far.
At the beginning of the year, the economy in the euro zone grew much faster than previously known.
In the first quarter, the 19 countries grew by 0.6 percent compared to the previous quarter, according to the statistics office Eurostat.
A previous estimate had shown growth of 0.3 percent.
The 27 EU countries also grew much faster than expected.
Instead of an increase of 0.4 percent, there is now an increase of 0.7 percent.
The strongest growth in the euro zone was recorded in Ireland at 10.8 percent and Latvia at 3.6 percent.
In France, on the other hand, the economy shrank by 0.2 percent.
The German economy grew by 0.2 percent.
The overall result was mainly supported by foreign trade.
Exports from the euro area increased by 0.4 percent over the quarter, imports into the currency area fell by 0.6 percent.
Consumer spending by private households and the member states developed negatively.
Apr/Reuters/dpa