OECD Economic Outlook

The war Russia is waging in Ukraine is a humanitarian disaster. Beyond this, the economic damage is already being felt worldwide and risks becoming increasingly severe and long-lasting.

Russia’s invasion of Ukraine on 24 February has thrown the growth recovery from the COVID 19 pandemic into doubt and has sewn catastrophe across the region, destroying lives, homes and infrastructure. The ramifications are being felt worldwide.

Here are the 3 key takeaways:
> Support needed for refugees
> Weaker economic growth, higher inflation
> Energy & food price rises hitting the poor the hardest

Support needed for refugees

Already more than 3 million people have fled Ukraine with more waves of refugees expected in the weeks ahead. So far, refugees have primarily gone to a small number of neighbouring countries. Burden sharing and EU support to the major host countries will be needed for support to be delivered more effectively and sustainably.

Weaker economic growth, higher inflation

Amid the uncertainty, the OECD estimates global economic growth could be more than 1 percentage point lower this year than was projected before the conflict, while inflation, already high at the start of the year, could be higher than it would have been if war had not broken out by at least a further 2.5 percentage points on aggregate across countries.

The chart shows the potential impact on GDP and inflation.

Energy & food price rises hitting the poor the hardest

With Russia supplying around 19% of the world’s natural gas and 11% of oil, energy prices have jumped alarmingly. Europe in particular is highly dependent on Russian gas and oil. Gas spot prices in Europe are now more than 10 times higher than a year ago while the cost of oil has nearly doubled over the same period. The price shock risks increasing poverty and disrupting the production of goods and services worldwide.

Commodity prices have risen sharply. Russia and Ukraine are important producers of wheat, fertilizers and metals used in industry such as nickel and palladium. Disruptions to wheat, maize and fertiliser risk raising hunger and food insecurity across the world in particular in emerging market and low-income countries. Soaring metals prices could affect a wide range of industries such as aircraft, car and chip manufacturing.

Download all data

What can governments do?

Help and protect refugees
with emergency humanitarian assistance,
accommodation,
medical care and schooling

Ease the impact of prices rises on consumers
The poorest countries and households spend the highest share of their incomes on energy and food
Targeted, temporary and means-tested support is needed to help the vulnerable. The measures could be financed by considering windfall taxes on energy company profits
Ensure trade and agriculture keeps flowing to emerging and lower-income economies

Diversify energy supplies and invest in energy security
Reduce dependency on fossil fuels and diversify suppliers
Maximise the use of existing low-emissions sources, including bioenergy and nuclear
Increase liquefied natural gas imports
Accelerate green energy investment with more funding for innovation

Key resources