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Britain will be more affected by the war in Ukraine than any other major economy Business

Laurence Boone, chief economist of the OECD, said there was “higher inflation in the UK than in other countries in Europe. As a result, there is faster monetary policy tightening and faster fiscal consolidation. In addition, “trade frictions and what’s happening with global supply chains” are also biting the UK, she said.

The OECD said that despite limited direct trade and financial links with Russia and Ukraine, the UK will suffer because rising global energy prices “add to pressure on household incomes, which are now declining in real terms”.

A Treasury spokesperson said: “Thanks to the support we have provided during the pandemic, the UK had the fastest growth in the G7 last year, and our unemployment rate is the lowest for nearly 50 years – but we recognize that many people will be affected by these predictions.”

“While we cannot entirely insulate the UK from global pressures, our economy is in a strong position to deal with these challenges.

“We have a growth plan and we support people with the cost of living.”

Britain’s problems are part of a major global downturn. World GDP will grow by 3% this year, a third slower than the OECD predicted in December, before the invasion of Ukraine.

Even before the war, inflation was taking its toll as the cost of living rose due to the pandemic rebound and China’s zero-Covid lockdowns.

The OECD said: “In most OECD economies, real household disposable income was already declining year-on-year in the last quarter of 2021, despite strong employment growth, and in many of them , this decline is estimated to have continued into the first quarter of 2022.”

Growth in the euro zone is expected to slow to 2.6% this year and 1.6% next year, with a risk of recession if Russian gas supplies are completely cut off, either by Moscow or by an embargo. from the EU, because “European economies are struggling to wean themselves off”. on Russian fuel. But because alternative energy sources may not be easy to develop quickly, there is a risk of higher prices or even shortages.

A complete end to Russian gas imports would take a further 1.25 percentage points off euro zone growth, which “could potentially leave many countries close to recession or in recession in 2023”, the OECD said. .

“Growth would also be weakened in 2024 if the shocks persist, as demand gradually aligns with the reduction in supply. Real household incomes would be hit hard, falling by more than 2% in eurozone economies.

But the OECD said it might be necessary to help Ukraine win the war: “Limiting Russia’s ability to finance the war, as provided for by an embargo on Russian oil exports, is essential to accelerating the end of this devastating conflict”. said the tank.

Meanwhile, the US economy is slowing from 2.5% this year to 1.2% next year, with Australia falling from 4.2% to 2.5% over the same period.

The war has added to China’s lockdowns, which are compounding the chaos that had already engulfed global supply chains during the pandemic.

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Source: www.telegraph.co.uk
This notice was published: 2022-06-08 11:30:43

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