PARIS - The war in Ukraine is first and foremost a major humanitarian crisis, but with associated economic shocks that threaten the recovery for all.

The newest OECD Economic Outlook highlights the implications and risks for growth, inflation and living standards from higher commodity prices and disruptions to energy and food supplies.

The price of war will ultimately be determined by our collective capacity to stave off a food and energy crisis, and protect low-income households.

GDP projections have been revised down substantially

Prior to the war, the world economy was on track for a strong, albeit uneven, recovery from COVID-19. The conflict in Ukraine has changed things dramatically.

Global GDP growth is now projected to slow to around 3%, and remain at a similar pace in 2023 ⁠— well below the pace of recovery projected last December. This growth slowdown will lead to lower incomes and fewer job opportunities.

The war is also having a large and global impact on inflation, which has already reached 40-year highs in Germany, the United Kingdom and the United States.

The costs of living are rising sharply

Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes, further dampening the recovery.

These changes will be felt mostly by low-income households who will struggle to pay for basic energy and food needs, and have little savings to absorb the blow.

The threat is greatest for low-income countries that are highly dependent on wheat, corn, mineral fertiliser, natural gas, and oil exports, especially in Africa, the Middle East and Central Asia.

The cost of living crisis will cause hardship and risks famine

Russia and Ukraine are important suppliers in many commodity markets. Together they accounted for about 30% of global wheat exports, 20% for corn, mineral fertilisers and natural gas, and 11% for oil. Prices for these commodities increased sharply after the onset of the war.

Without action, there is high risk of a food crisis. Supply disruptions are rising, particularly threatening low-income countries that are highly dependent on Russia and Ukraine for basic food staples. With public budgets stretched by two years of the pandemic, these countries could struggle to provide food and energy at affordable rates to their populations, risking famine and social unrest.

The surge in commodity prices and possible disruptions to production will have significant consequences. The sharp rise in prices is already undermining purchasing power, which will force lower income households worldwide to cut back on other items to pay for basic energy and food needs.