The International Monetary Fund released this week in Washington DC the World Economic Outlook, its flagship publication, with a subtitle indicating the war in Ukraine has set back the global recovery. War Dims Global Economic Outlook as Inflation Accelerates – IMF Blog
Together with the humanitarian crisis in Eastern Europe, the Fund says the conflict has hit the global economy when it “had not yet fully recovered from the COVID-19 pandemic”. Also, inflationary pressures are leading to tighter monetary policies, while lockdowns to control the pandemic in China are slowing down economic activity and threatening global supply chains. The projection for global growth is lowered to 3.6 percent in 2022 and 2023.
The effects of the war on the global economy were immediately felt in commodity markets, mainly through fuel and food price increases which have intensified existing inflationary pressures. The Fund projects higher global inflation for this year, at 5.7 percent in advanced economies and 8.7 percent in emerging market and developing economies.
The report describes several downside risks, such as increased social tensions generated by sharp increases in food and fuel prices and a resurgence of the pandemic. Also, the slowdown in the advanced economies and in China with higher interest rates, which may lead to debt distress among emerging market and developing economies. In the longer term, there is concern about a “wider deterioration of the geopolitical environment” and “the ongoing climate emergency”.
