Remarks by Mathias Cormann,
Secretary-General, OECD
Paris, 8 June 2022
Good morning,
Today’s presentation of the OECD Economic Outlook 2022 takes place amid heightened geopolitical tensions as well as the ongoing pandemic.
Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine continues.
And, with it, the suffering and destruction of human lives and livelihoods.
This war is first and foremost a humanitarian disaster.
The total international displacement of people escaping the war in Ukraine is now approaching 7 million people since the outbreak of the war. More than 8 million have been internally displaced at some point during the war.
The damage to Ukraine’s economy and infrastructure is extensive and growing by the day.
But, as we know, the repercussions of this war go well beyond Ukraine.
It presents a serious continuing threat to our rules-based international order and it adds significant instability and uncertainty to a global economy which was still recovering.
Earlier this year, the recovery from the pandemic was well established, even though its pace was uneven across countries and sectors.
While inflation was rising it was thought to be temporary.
As a result of Russia’s war, global growth will be lower and inflation will be higher for longer.
Both business investment and private consumption growth have been hit.
The war has further exacerbated supply chain disruptions which had previously been brought on by the pandemic, which is pushing up energy and food prices and causing significant price volatility.
Zero-COVID policies in China are also driving further price pressures as a result of supply bottlenecks and sharply weakened economic activity in China.
Consequently - the Economic Outlook we are presenting to you today is much more pessimistic than some months ago.
Russia’s war is indeed imposing a heavy price on the global economy.
Global growth will be substantially lower with higher and more persistent inflation.
We now project global growth in 2022 at 3% – a downward revision of 1.5 percentage point with respect to our December projections – with a further slowing in 2023 to 2.8%.
Projections for consumer price inflation have been revised significantly upwards.
We project inflation in 2022 to average 8.8% across the OECD, before receding slowly in 2023, as supply-chain and commodity price pressures wane and monetary policy measures continue to take effect.
The economic situation in the short term requires bold, well-designed and coordinated policy measures.
But we need to ensure that our measures to address short term pressures do not divert us from our path of addressing increasingly pressing structural challenges – securing the green transition, optimising the digital transformation, responding to the challenges posed by population ageing and ensuring sustained energy and food security.
All this at a time when, as a result of recent shocks, public finances are under pressure and public debt levels have increased everywhere.
Countries will indeed need to rebuild fiscal buffers.
To give themselves the fiscal space to address structural reform challenges, while also rebuilding fiscal resilience to deal with inevitable future shocks.
As usual, our Chief Economist and Deputy Secretary-General Laurence Boone will present the details of our analysis, but let me highlight some key pressing challenges.
First, we need to work together to avoid a food crisis.
Price hikes undermine consumption everywhere.
Low-income earners, who spend a disproportionate part of their resources on food and energy, are the most affected again – just as they were gradually recovering from the COVID-19 shock.
We need to do everything we can to avoid low-income countries being dragged into a food crisis as a result of Russia’s war of aggression against Ukraine.
This is a major global challenge, which requires a major joint effort.
We need to keep markets open to ensure that existing supplies can reach the places where they are most needed.
In this context it is really important to note that global wheat supply during the 2021/22 marketing season (that is between May 2021 and June 2022) actually increased.
What we have seen are large shifts between major exporters requiring an adjustment to global wheat trade, which has contributed to rising prices.
Which means we also must tackle any logistical barriers, we must avoid export bans or protectionist measures and further boost our efforts to transport commodities out of Ukraine.
For next year we will need to do what we can to secure adequate global production and supply, despite the impacts of the war, droughts and the higher price of fertilizers.
Second, we must show leadership in guiding the energy and climate transitions.
Western sanctions, and most recently the decision of the European Union to put an embargo on oil imports from Russia, are important, concrete steps towards increased strategic autonomy from Russia.
As Laurence will explain, the embargo has substantial economic implications, but it is a very important tool to help accelerate the end of the war and to advance the necessary energy transition.
Many countries have the opportunity to reduce reliance on Russian energy sources, consistent with the ten-point plans in relation to oil and gas set out by the International Energy Agency.
Accelerating the green energy transition will enhance energy security and reduce emissions – in line with our commitments to reach global net zero emissions by 2050.
Third, now, more than ever, we need to ensure well-functioning global markets and a global level playing field.
The sustainable expansion of global trade and investment is one of the most important drivers of further economic development and better international economic relations.
While global supply chains proved more resilient than expected during the COVID-19 crisis, they are facing renewed pressure in the wake of Russia’s war against Ukraine.
We need to strengthen the rules-based international trading system with the WTO at its centre, by ensuring that markets remain open to trade and investment to the greatest extent possible.
Supporting trade diversification will strengthen supply chain resilience and the strategic autonomy of countries, while pushing back against the forces of economic nationalism and protectionism.
We should avoid a fragmentation of supply chains and payments systems, which would diminish the efficiency gains from global trade and finance.
Finally, we should continue to do everything we can to further strengthen our support for the democratically elected government in Ukraine.
The OECD has stood in strong solidarity with the people and the democratically elected government of Ukraine.
We have recently established a dedicated OECD Ukraine Liaison Office, initially in Paris and to be opened in Kyiv as soon as possible.
The purpose is to further strengthen and deepen our engagement with Ukraine in support of their plans for recovery and reconstruction.
It is in everyone’s interest for this senseless, atrocious, unprovoked war to stop.
Let’s hope it does and that the opportunity to start rebuilding Ukraine comes our way sooner rather than later.
I will now pass the floor to Laurence to deliver the details on our analysis.
Thank you.
