War in Ukraine slows global growth to 3.6%

War in Ukraine slows global growth to 3.6%

The International Monetary Fund (IMF) estimates that the global economy will grow 3.6% this year, 0.8 percentage points less than expected in January, mainly due to the effects of Russia’s military invasion of Ukraine. Inflation in advanced economies rose to 5.7%.

“In addition to the immediate humanitarian effects, war will severely impede global recovery, slow growth and increase inflation,” the International Monetary Fund says in its World Economic Outlook, a report that includes the world’s economic outlook released this Tuesday. April 19.

In January, the International Monetary Fund was bullish and predicted that the global economy would accelerate in the second quarter of this year, after the short impact of the micron variable at the start of the year. But within three months, the international situation deteriorated, mainly due to the invasion of Ukraine and sanctions against Russia.

Now, the fund expects the global economy to grow by 3.6% in 2022 and 2023, a downward revision from its January forecast, much steeper this year (by 0.8 percentage points) than the next (0.8 percentage point .2 point).

This review reflects the direct impact of the war on Russia and Ukraine — and the global recovery, the report says. The fund expects significant GDP contractions in the two countries this year, albeit from different origins: the “severe collapse” in Ukraine is a direct result of the invasion, which destroyed infrastructure and led to a mass flight of its residents. In Russia, the sharp decline in GDP reflects the impact of sanctions, with weak trade, difficult financial intermediation and a loss of internal confidence.

However, the International Monetary Fund wrote that the economic effects of the war are “widespread, like seismic waves emitted by an earthquake.” This is seen in the markets for raw materials, international trade and financial linkages.

Since Russia is a major supplier of oil, natural gas and minerals, along with Ukraine, corn and wheat, the decrease in the supply of these commodities has already led to a sharp rise in prices. “Europe, the Caucasus, Central Asia, the Middle East and North Africa and sub-Saharan Africa are the hardest hit,” he says. He warns that “higher food and fuel prices will affect low-income families around the world.”

In addition, the IMF now expects inflation to rise to 5.7% in advanced economies and to 8.7% in emerging markets and developing economies – 1.8 and 2.8 percentage points higher than estimated values ​​in January.