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March 17 (UPI) -- The global economy was rocked by the Russian invasion of Ukraine last year and it may take at least a year before broader markets recover, the OECD said Friday. A report from the Organization for Economic Cooperation and Development finds the global economy expanded by 3.3% in 2022, about 1% slower than it expected at the end of 2021.
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Much of that was triggered by Russia's invasion of Ukraine last February. A major oil and gas producer, sanctions imposed by Western economies resulted in a major spike in energy prices, creating further woes for a global economy still coping with pandemic-era supply-chain issues.
"Growth is projected to remain at below-trend rates in 2023 and 2024," the OECD's report read.
Among the world's major economies, China and India expand the most at 5.3% and 5%, respectively, this year. China cools off in 2024 to 4.9%, though India's economy is expected to expand by 7.7%, sharply higher than any other peer economy.
On the low end, both Britain and Russia seem to be headed to a contraction this year, with British growth declining by 0.2% and Russia's shrinking by 2.5%. That's a staggering forecast considering Argentina, with a year-on-year inflation rate over 100%, performs better this year with a 0.1% expansion, according to OECD estimates.
Inflationary strains are creating headwinds for the world's leading economies. Inflation in the British economy is running at around 8.8% for the 12-month period ending in February. That level for the U.S. economy, the world's largest, is closer to 6%, far lower than 9.1% year-on-year rate posted to June 2022.
"A key factor in the improvement in activity and sentiment in early 2023 was the recent decline in energy and food prices," the OECD's report read. "While levels are still relatively high compared to pre-war, this is boosting purchasing power for most firms and households and is helping to lower headline inflation."
In the U.S. economy, the Producer Price Index, a reflection of prices at the wholesale level, declined 0.1% in February and those prices should eventually make their way down to the consumer level.
The OECD expects inflation for the G20 to average 5.9% this year.
The organization made no direct reference to concerns about a banking crisis triggered by the collapse of Silicon Valley Bank and Signature Bank in the U.S. economy. Those fears spread to the European economy, though officials at the European Central Bank said the banking sector is on sound footing.
The ECB nevertheless hiked its lending rates by 50 basis points this year citing higher-for-longer inflation. The U.S. Federal Reserve meets Thursday to consider its next step in the fight against consumer-level inflation.
Before the collapse of the two U.S. banks, the Fed was largely expected to follow its peers with a 50 basis point rate hike, though market watchers have dialed that back to a 25bp increase given SVB's collapse was triggered in part by aggressive rate hikes in the past.
