It added that a well-targeted increase in government spending by OECD countries, of the order of 0.5% of GDP, could almost halve the economic impact of the war.
It added that a well-targeted increase in government spending by OECD countries, of the order of 0.5% of GDP, could almost halve the economic impact of the war.
The Ukraine crisis could knock global growth by more than one percentage point this year and add two and a half percentage points to inflation, the OECD estimated on Thursday, calling for targeted government spending hikes in response.
The Organization for Economic Co-operation and Development stated that a well-targeted increase in government spending by OECD countries of the order of 0.5% of GDP could reduce the economic impact of the war by almost half, without a significant increase in inflation.
With Europe strongly dependent on Russian energy imports, the negative impact of the war on the euro area economy could be up to 1.4%, while in the United States it would be around 0.9%, as estimated by the OECD in its analysis of economic results. have put. Warning.
Although Russia and Ukraine only make up 2% of global GDP, they have a major impact on energy and commodities markets as major producers of raw materials used in everything from catalytic converters for cars to fertilizers.
As rising energy and commodity prices put new pressure on already rising inflation, the OECD said central banks should focus on normalizing monetary policy, although a slower pace would be needed in countries where the economic fallout from the war. is the worst.
It added that if any major tensions emerge, central banks should be prepared to intervene as necessary to keep financial markets functioning.
In the face of rising energy and food costs, many governments have given handouts to consumers and businesses, some even introducing price controls or cutting duties and taxes.
The OECD said governments should be careful to ensure that such measures are temporary and targeted, and suggested that some may consider funding additional spending by taxing windfall gains.