Russia’s invasion of Ukraine immediately slowed the recovery from the Covid-19 pandemic and set the global economy on a course of lower growth and rising inflation according to the OECD. In its latest economic outlook, the organisation forecasts global growth to decelerate sharply to around 3% this year and 2.8% in 2023, well below the recovery projected in the previous outlook issued last December.

The economic and social impact of the war is strongest in Europe, with many of the countries hardest hit in Europe, given exposure through energy imports and refugee flows. High inflation is eroding household incomes and spending, while the risk of a serious food crisis remains acute for the world’s poorest economies because of the high risk of supply shortages and elevated costs.

Further increases in food and energy prices and persisting supply-chain bottlenecks are key factors causing consumer price inflation to peak at higher levels and remaining high for longer than previously projected. In some advanced economies, inflation is now expected to reach levels not seen since the 1970s. Cost pressures should start to ease with the impact of rising interest rates beginning to be felt through 2023, but the OECD says that core inflation is still projected to remain at or above central bank target ranges in many major economies.

Mathias Cormann, OECD secretary-general, said: “Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery. This slowdown is directly attributable to Russia’s unprovoked and unjustifiable war of aggression, which is causing lower real incomes, lower growth and fewer job opportunities worldwide.”

In addition to uncertainty over the duration and future scope of Russia’s war against Ukraine, the OECD warns that the pandemic is not yet over, pointing out the risks posed by the potential emergence of more aggressive or contagious variants may emerge, and the impact of zero Covid policies in China which may continue to disrupt supply chains.

Laurence Boone, the OECD’s chief economist, said: “The outlook is sobering, and the world is already paying the price for Russia’s aggression. The choices made by policymakers and citizens will be crucial to determining how high that price will be and how the burden will be shared. Famine is not a price the world should pay.”

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