A woman shops at at supermarket in Lviv, Ukraine, when many storable food products were sold out.
Chen Wenxian/Xinhua via Getty Images
- The IMF on Tuesday cut its global growth projection for 2022 largely due to the Russia-Ukraine war.
- It now expects growth of 3.6%, lower than its previous outlook of 4.4%.
- The toll will be heavy on Ukraine’s economy which is expected to contract by 35% this year.
The International Monetary Fund on Tuesday projected a sharp slowdown in 2022 economic growth worldwide as Russia’s war against Ukraine drives up energy prices and hurts the recovery from the COVID pandemic.
The IMF now sees global growth at 3.6% this year, a cut from its 4.4% forecast issued in January and slower than the expansion of 6.1% in 2021. Beyond 2023, it expects global growth to decline to about 3.3% over the medium term.
“The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution,” the IMF said in its World Economic Outlook published after Russia invaded Ukraine on February 24.
The deadly conflict was contributing to already high inflation, it said. “Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest.”
Commodity prices driven up by the war and broadening price pressures prompted the financial institution to lift its inflation projections. It sees inflation hitting 8.7% in emerging market and developing economies, and 5.7% in advanced economies. The previous outlooks had been 5.9% and 3.9%, respectively.
Brent crude and West Texas Intermediate crude oil prices have shot up by close to 40% this year on supply shortage and embargo concerns involving Russia, a major oil producer. In the US, the surge in oil prices has pushed the national average for gas prices well past $4 a gallon. Leaping gas prices contributed to March headline inflation accelerating 8.5%, marking the fastest increase since December 1981.
The war is set to lead to contractions in both the Ukrainian and Russian economies in 2022.
The IMF projected Ukraine’s gross domestic product will shrink by 35% but said it’s “impossible to obtain” precise measures of the damage from the war.
“And even if the war were to end soon, the loss of life, destruction of physical capital, and flight of citizens will severely impede economic activity for many years to come,” said the Washington, DC-based group. Ukraine’s economy grew 3.4% in 2021.
It sees Russia’s economy shrinking 8.5% in 2022, with a further decline of 2.3% in 2023. “The withdrawal of foreign firms has hobbled many industries, including aviation, finance, software, and agriculture. As a result, the outlook remains bleak,” it said.
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