China will escape relatively unscathed from the effects of the Russian invasion of Ukraine compared with most other large economies, according to a report by the Organisation for Economic Co-operation and Development (OECD).
Economic growth in China will slide to 4.4% in 2022 and rebound to 4.9% in 2023, the OECD said.
That contrasts with the US, where gross domestic product (GDP) growth will slow to 2.5% in 2022 and just 1.2% in 2023.
The GDP figures for Japan are 1.7% in 2022 and 1.8% in 2023, while in South Korea growth will moderate to 2.7% in 2022 and 2.5% in 2023. Australia’s economy is expected to grow 4.2% in 2022 and 2.5% in 2023.
The report – “The Price of War” – noted that the conflict in Ukraine and the supply-chain disruptions exacerbated by shutdowns in China due to its zero-Covid policy are dealing a serious blow to global recovery.
Worldwide GDP growth is now projected to slow sharply this year, to around 3%, and remain at a similar pace in 2023.
“Growth is set to be markedly weaker than expected in almost all economies,” the OECD said, noting that many of the hardest-hit countries are in Europe, which is highly exposed to the war through energy imports and refugee flows.
Higher Commodity Prices
Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, further dampening the recovery.
But the report noted that China’s large oil and grain reserves will mitigate the impact of rising global energy and food prices. Exports will remain relatively strong as companies continue to raise their market shares, the OECD added.
“The impacts of the war in Ukraine have mostly been felt through the impact on global markets as neither Ukraine nor Russia is an important economic partner for China,” the report said.
“The release of edible oils reserves has helped keep food inflation under control, despite price rises in international markets due to the war in Ukraine.”
However, lockdown-induced supply-side constraints on fresh food have started to push the consumer price index higher, with headline inflation reaching 2.1% year-on-year in April, although core inflation remained low at 0.9%.
However, Chinese real estate investment will remain weak due to the continuing defaults across developers and falling price expectations.
While real GDP in India is projected to grow by 6.9% in fiscal year 2022-23 and 6.2% in 2023-24, the report noted that the Indian economy is progressively losing momentum.
The OECD said Indian “inflationary expectations remain elevated due to rising global energy and food prices, monetary policy normalises and global conditions deteriorate”.
- George Russell