No recession, but help needed to meet rising fuel bills, says OECD
Government measures to cushion consumers from rising energy costs should be “targeted and temporary” rather than broad-based, the Organization for Economic Co-operation and Development (OECD) warned.
reland, along with most countries, has provided a range of different financial supports to households, drivers and industrial sectors affected by rising fuel prices, including direct electricity rebates for billpayers and a reduction in excise duty on motor fuel. Taoiseach Micheál Martin also said his government is seeking European Commission approval to reduce VAT on fuel bills.
But the OECD says cash transfers aimed at low- and middle-income households can be more targeted and have a larger impact than tax cuts or imposing price caps.
Price caps and tax cuts directly lower energy bills, but benefit higher-income households and contribute to the overall cost of support, said OECD chief economist Laurence Boone.
Meanwhile, the report said the war underscored the importance of minimizing dependence on Russian gas and oil.
“Policymakers should reconsider the adequacy of market design in terms of ensuring energy security and incentivizing to ensure the green transition in a publicly supported way.”
In its March forecast, the Paris-based group, which coordinates and advises policy for wealthy nations including Ireland, said Russia’s invasion of Ukraine will reduce global growth and growth in Europe — especially just before the war itself, but not enough to push the eurozone into recession.
The effects of the war will reduce growth by about half a percentage point, the OECD said.
The European Central Bank’s latest forecast assumes growth of 3.7%, which would still be far from a recession.
However, in a worse scenario, energy exports from Russia to the EU could be halted entirely, the OECD report says.
“The impact of such a shock is difficult to quantify but could be abrupt given the limited ability to replace supplies from world markets in the short term and low gas reserves.”
This is a key potential economic risk and could result in a gas price shock twice the size of the report’s estimates, although Ireland is ranked as the country with the least dependent economy on Russian energy, reflecting both the geography and importance of relative reflects less energy. intensive industries here including pharmaceuticals.
Both Ukraine and Russia are major food exporters and the production of both is in doubt.
The report calls for increased production in OECD countries, abandonment of protectionism and multilateral support to help countries hardest hit by a supply disruption.
The other major impact of the war is the refugee crisis, with around three million people already entering the European Union.
The cost of handling and accommodating people during the last major refugee crisis in 2015 was between €10,000 and €12,500 per person in the first year and the OECD said it needed an EU response.
https://www.independent.ie/business/world/no-recession-but-help-is-needed-to-meet-soaring-fuel-bills-says-oecd-41459466.html No recession, but help needed to meet rising fuel bills, says OECD