The cost of war. The world will miss $2.8 trillion due to Russia’s aggression against Ukraine
- Alexey Kalmykov
- BBC
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The world will be even poorer than thought because of Russia’s aggression against Ukraine. The global economy will miss $2.8 trillion next year, according to the OECD’s club of rich countries. Among the world’s twenty imprisoned economies, Russia suffers the most.
“The global economy is slowing down. This is due to Russia’s unprovoked, unjustified and criminal aggression against Ukraine. GDP growth is being pursued in many cases, and judging by the data on the state of the economy, the slowdown will be prolonged,” said OECD Secretary General Matthias Kormann.
In addition to the energy crisis, the emergence of the Kremlin’s gas war against Europe, record inflation and the coronavirus lockdown in China are weighing on the growth rate of wealth in the world. But the main thing is the war.
Without it, in 2023 the global economy would be 2% larger than in the forecast published on Monday. In money terms, this is a gigantic figure – 2.8 trillion dollars, about one and a half times more than Russia’s GDP.
Russia is experiencing the most significant drop next year among the 20 economies of the world – 4.5% of GDP.
Outside of Russia, the OECD will read a decline in GDP in 2023 only in Germany (minus 0.7%) – in Europe, the main buyer of Russian gas and a leading exporter. The industrial engine of the Old World is stalling because of the gas diet that the Kremlin put the Germans on, as well as because of the slowdown in the Chinese economy.
The rest have grown more than others – Turkey, India, China and Saudi Arabia, who have benefited from the energy and sanctions war between Russia and the West.
Everything could be worse
Both in the US and in the eurozone – two economies of the West – the forecasts for the next year are worsening. Now the OECD expects a barely noticeable increase of half a percentage point in America, and in 19 eurozone countries – by 0.3%.
However, even these gloomy forecasts may turn out to be overly optimistic, as there are connections with bold assumptions.
First, the economists did not take into account in their models the possible escalation of Russia’s war against Ukraine or the expansion of aggression in another territory. Secondly, they proceeded from the fact that covid is a thing of the past, and there will be no new waves and lockdowns in the coming winter.
And third, they factored in the gradual improvement of Europe’s energy crisis. This is the biggest risk, OECD experts admit.
They take into account in the forecasts and provide for voluntary gas consumption in the EU, and forced – due to high prices, and high reserves in underground storage facilities, and new contracts for the purchase of gas in alternative countries. However, the maps can be confused by a too cold winter or interruptions in supplies from other sources.
The European Commission (the de facto government of the EU) planned how to survive the winter without Russian gas, but 27 countries have not yet agreed on it. Energy ministers are internally negotiating this week. EU at the summit in Prague.
Oil Crisis
If the confrontation with Russia escalates into a full-blown gas blockade and an all-out energy crisis, Europe will turn into a recession, and will not have time to recover from the outbreak of the outbreak due to the Covid pandemic.
Another unknown is the European embargo on Russian oil.
It will affect 2 million barrels per day, or about 2% of the supply of exports to the world market. It will not be possible to quickly redirect these volumes to other markets in Russia, since the EU also prohibits insurance, financing and sea transportation of Russian vegetables.
“As a result, the chance of supply disruptions to the global oil market has increased. This applies, for example, to diesel fuel in Europe,” OECD economists write.
“All of these factors heighten the risk that the price of the global economy will even be realized than in the new baseline.”