The war in Ukraine reduces world economic growth by 1%

The war in Ukraine wiped out a percentage point of global economic growth this year and will cause nearly as much damage in 2023, new research has revealed.

A study by OGResearch shows that the projected 4.1% global GDP growth for this year has been reduced to 3% as a direct result of Vladimir Putin’s invasion.

Global growth is also expected to be 0.7 percentage points lower in 2023 due to the war: 2.3 percent, instead of 3 percent.

The invasion also added 2 percentage points to global inflation this year and will add another 1 percent in 2023, according to the analysis. The increase is partly due to the price of Brent crude, 25% higher this year than pre-war forecasts, and the effect is expected to last for several years.

“The war reduced the growth prospects of the world economy, raised the prices of basic goods and food, and fueled inflation,” says David Vavra, managing partner at OGResearch. “2023 will be the worst year for global growth in the last two decades, excluding the years of the pandemic and the global financial crisis.”

The silver lining is that these global effects are unlikely to be long-lasting. Global GDP in 2024 is expected to be 3%, 0.25 points higher than pre-war estimates, as the global economy recovers.

The data highlights how damaging the Ukraine war continues to be for the global economy. While Ukrainian counteroffensives in recent weeks have driven Russian forces back over the Dnipro river in the south of the country, the fighting is expected to subside during the cold Ukrainian winter and continue well into the new year.

The analysis comes in the run-up to the Price of War conference, a symposium on the economics of conflict, in London on December 1.

The invasion of Russia has turned the established global order upside down, and there is an urgent need for a constructive debate on how decision makers should best navigate this uncertain environment.

Professor Peter Frankopan, Merryn Somerset Webb, Tim Marshall and Martin Wolf are among the world-renowned academics, financial experts, business leaders and commentators gathering at the exclusive event, co-sponsored by CERGE-EI and Reaction.

If you are interested in attending, please email: [email protected]

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