Group warns Ukraine conflict will take toll on global economy

An international group is warning that Russia’s invasion of Ukraine will take a significant toll on the global economy.

In a report released on Thursday, the Organization for Economic Cooperation and Development (OECD) estimated that gross domestic product (GDP) in the world will decrease by 1.08 percent as a result of Russia’s invasion of Ukraine.

For the U.S., the OECD says GDP will shrink by 0.88 percent because of the conflict in Ukraine, and the group estimated that the violence in Eastern Europe will pull GDP in the euro area down by 1.4 percent.

The OECD pointed to government spending and taxes as ways to ease the impact of the Russian invasion in its report. The group said “a well-targeted rise” in government spending of 0.5 percent GDP for one year in OECD countries “could offset around one-half of the estimated decline in output from the conflict without adding significantly to inflation.”

In terms of taxes, the group cited windfall taxes on energy and company profits.

Russia’s invasion of Ukraine entered its fourth week on Thursday with no signs of the violent offensive subsiding. The U.S. and its allies have imposed sweeping sanctions on Moscow, targeting top Russian officials, its central bank and various oligarchs.

The penalties have caused the ruble to decrease in value, and they have led to the Russian stock market being closed for weeks.

The conflict is also having an impact on the U.S. economy. The White House has dubbed the spike in inflation “Putin’s price hike,” arguing that a large driver of the high inflation in the past month was an increase in gas and energy prices, which grew as a reaction to the invasion.

The OECD on Thursday said the conflict “has caused a humanitarian crisis in Ukraine, destroying lives, homes and infrastructure, while throwing the strong global economic recovery from the COVID 19 pandemic into doubt.”

“Amid the uncertainty, the OECD estimates global economic growth will be more than 1 percentage point lower this year as a result of this conflict, while inflation, already high at the start of the year, could rise by about a further 2.5 percentage points on aggregate across the world,” the group added.