According to a report by the Organization for Economic Co-operation and Development (OECD), China will weather the effects of Russia’s invasion of Ukraine relatively unscathed compared to most other major economies.
China’s economic growth will slow to 4.4% in 2022 and rebound to 4.9% in 2023, according to the OECD.
That contrasts with the US, where gross domestic product (GDP) growth will slow to 2.5% in 2022 and just 1.2% in 2023.
GDP figures for Japan are 1.7% in 2022 and 1.8% in 2023, while South Korea’s growth will slow to 2.7% in 2022 and 2.5% in 2023. Australia’s economy is expected to grow by 4.2% in 2022 and 2.5% in 2023.
The report – “The Price of War– Noting that conflict in Ukraine and supply chain disruptions, exacerbated by shutdowns in China due to its zero-Covid policy, are dealing a major blow to the global recovery.
Global GDP growth is now expected to slow sharply to around 3% this year and remain at a similar pace in 2023.
“Growth is likely to be significantly weaker than expected in almost all economies,” said the OECD, noting that many of the hardest-hit countries are in Europe, which is heavily exposed to war through energy imports and refugee flows.
Higher commodity prices
Countries around the world are being hit by higher commodity prices, adding to inflationary pressures and dampening real incomes and spending, further dampening the recovery.
However, the report noted that China’s vast oil and grain reserves will mitigate the impact of rising global energy and food prices. Exports will remain relatively strong as companies continue to increase their market shares, the OECD added.
“The impact of the war in Ukraine was felt primarily through its impact on global markets, as neither Ukraine nor Russia is a major economic partner for China,” the report said.
“The release of cooking oil reserves has helped keep food inflation under control despite price increases in international markets due to the war in Ukraine.”
However, lockdown-related supply-side restrictions on fresh food have started to push CPI higher, with headline inflation hitting 2.1% yoy in April, although core inflation remained subdued at 0.9%.
However, Chinese real estate investment will remain weak due to ongoing developer defaults and falling price expectations.
While real GDP in India is expected to grow by 6.9% in FY 2022-23 and by 6.2% in FY 2023-24, the report found that the Indian economy is increasingly losing momentum.
The OECD said that Indian “inflation expectations remain high on rising global energy and food prices, normalization of monetary policy and worsening global conditions”.
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George Russell
George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, Wall Street Journal, Bloomberg, New York Post, Variety, Forbes, and South China Morning Post.
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