The war in Ukraine may subtract 1 point from the growth of the world economy in a year (OECD)

The war in Ukraine could cost one point of global growth over a year if its effects on energy and financial markets endure, the Organization for Economic Cooperation and Development (OECD) warned on Thursday.

The international organization estimates in a report this loss from the start of Russia's offensive in Ukraine on February 24, which could also add 2.5 points to global inflation and generate “a deep recession in Russia.”

Outside Russia and Ukraine, the consequences would be felt mainly in Europe, a continent dependent on the supply of raw materials, food and energy from both countries. The conflict could detract 1.4 points of growth from the Eurozone.

Countries “that have a common border with Russia or Ukraine” are the ones that will feel the most impact, while hosting the majority of refugees from Ukraine,” according to the Paris-based organization, which has 38 member countries.

Governments could mitigate the impact on the economy with “targeted fiscal support”, avoiding fueling too much price increases. Inflation is already at high levels around the world, driven mainly by energy.

The US Federal Reserve raised its benchmark interest rates by a quarter of a percentage point to 0.25-0.50% on Wednesday, in its first increase since 2018, to address 40-year high inflation.

The organization also warns of the risk of a “sharp increase in poverty and hunger”, especially in developing economies if the wheat supply of Russia and Ukraine is completely cut off.

Belligerent countries account for 30% of world exports of wheat, 20% of corn, mineral fertilizers and natural gas, and 11% of oil, estimates the OECD.

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