Germany to enter recession in 2023, OECD warns 'global economy has lost momentum'

The Organisation for Economic Co-operation and Development (OECD) has forecasted that Germany will enter recession in 2023, The Spectator Index reported. In the interim Economic Outlook report, the OECD warned that the global economy has "lost momentum" due to Russia's offensive in Ukraine. It underscored that the war has caused a rise in energy prices, especially in Europe, and aggravated inflationary pressure at a time when the cost of living was already "rising rapidly" due to the COVID-19 pandemic. 

On September 19, Germany's Central Bank Bundesbank in its report said that Germany is on track for recession as inflation is set to reach 10%. In the report, the Bundesbank said, "There are mounting signs of a recession in the German economy in the sense of a clear, broad-based and prolonged decline in economic output," Politico reported.

Germany's Central Bank has expected that the German economy will shrink in the current quarter and a further decline in the last quarter of 2022 and the first quarter of 2023. The Bundesbank noted that the high inflation and uncertainty related to energy supply impact the gas, electricity-intensive industry, export business, private consumption, and service providers. The report said that inflation is witnessing a further increase and will reach double digits in the coming months. Notably, Germany is making efforts to reduce dependence on Russian energy imports after Moscow's invasion of Ukraine. 

Inflation projected to recede gradually through 2023 in most G20 nations: OECD

According to the OECD report, inflation is projected to recede gradually through 2023 in most G20 nations. The OECD Secretary-General Mathias Cormann noted that the GDP growth has been "stalled" in many economies and economic indicators which indicates an "extended slowdown." Cormann noted that the inflationary pressure that already existed in the global economy has been "severely aggravated" by the war between Russia and Ukraine.

In the report, the OECD noted the "substantial uncertainty about the economic outlook, with significant downside risks," including a rise in energy and food, and gas shortages as winter approaches in the Northern hemisphere. It underscored that all these factors will reduce the growth in the European economies by more than 1¼ percentage point in 2023 and "push many countries into a full recession in 2023." It further said that the GDP growth will be weakened in 2024. 

“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to an extended slowdown,” OECD Secretary-General Mathias Cormann said.

“Inflationary pressures that were already present as the global economy emerged from the pandemic have been severely aggravated by the war. This has further driven rising energy and food prices that now threaten living standards for people across the globe," Mathias Cormann added. 

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