The global economy will take a bigger hit next year than previously forecast due to the fallout from Russia’s war in Ukraine, the OECD said on Monday.

In a somber report titled “Paying the Price of War,” the Paris-based organization found that the conflict was exacerbating inflationary pressures when the cost of living was already rising rapidly.

Covid outbreaks continue to impact the global economy, while growth has also been hampered by rising interest rates as central banks scramble to cool red-hot prices, the OECD said.

“Some indicators have deteriorated and global growth prospects have clouded over,” the Organization for Economic Co-operation and Development said in the report.

Global growth stalled in the second quarter of this year, and data in many economies “now point to an extended period of subdued growth,” according to the OECD.

The organization lowered its 2023 growth forecast for the global economy to 2.2 percent, down from 2.8 percent in its previous estimate in June.

The outlook for almost all nations in the top 20 group of economies has been lowered, with the exception of Turkey, Indonesia and the UK, although the latter is forecast to grow at zero.

Growth in the United States – the world’s largest economy – is forecast to slow to 0.5 percent by 2023.

The growth forecast for China, whose economy has been hit by severe Covid lockdowns, was sharply cut to 3.2 percent this year, while it was slightly lower at 4.7 percent for 2023.

Germany is now expected to slide into recession next year, with Europe’s largest economy now set to contract by 0.7 percent – down 2.4 percentage points from the previous forecast.

The country’s economy has been hit hardest in Europe, as it relied heavily on Russian natural gas supplies, which Moscow has cut significantly in alleged retaliation for Western sanctions.

The euro zone as a whole will post meager growth of 0.3 percent, a sharp depreciation of 1.6 percent.

The OECD left its global growth forecast for 2022 unchanged at 3 percent after lowering it earlier.

To highlight the impact of Russia’s invasion of Ukraine, the OECD said global production in 2023 is now projected to be $2.8 trillion lower than previously estimated before the December 2021 conflict.

The war has pushed up energy and food prices amid supply concerns, as Russia is a major oil and gas producer, while Ukraine is a major grain exporter to countries around the world.

Inflation was already rising before the conflict due to bottlenecks in the global supply chain after countries emerged from Covid lockdowns.

“The effects of war and the ongoing impact of Covid-19 outbreaks in some parts of the world have weighed on growth and put additional upward pressure on prices,” the OECD said.

“Inflationary pressures have become increasingly widespread, with higher energy, transport and other costs feeding through to prices,” it said.

The OECD raised its inflation forecast for the G20 to 8.2 percent for 2022 and 6.6 percent for next year.

Governments have announced emergency measures to help households and businesses cope with the rising cost of living.

But fiscal measures to balance energy costs “were poorly targeted,” according to the OECD.

Central banks, meanwhile, have hiked interest rates, a move needed to tame inflation but which can also push economies into recession.

The tightening of monetary policy is a “key factor behind the slowdown in global growth,” said the OECD.

The organization warned that “significant uncertainty surrounds forecasts” for the global economy.

Greater fuel shortages could hurt the European economy by a further 1.25 percentage points and global growth by half a point in 2023