IMF warns of war on Ukraine and inflation will weaken world growth in 2022 and 2023

“We are facing a crisis on top of a crisis,” the IMF managing director explained. However, most countries should continue to see their GDP growth.

There is no global recession but growth that is running out of steam in the long run: the war in Ukraine has exacerbated inflation, which threatens a global recovery not only this year but also in 2023, warned Kristalina Georgieva, the IMF’s managing director on Thursday.

In January, even before Russia invaded Ukraine, the International Monetary Fund lowered its global growth forecast for this year to 4.4%, due to the Omicron variant. On the other hand, it changed its projections for next year. The conflict in Ukraine has changed the situation.

“In other words: we face a crisis upon a crisis,” Georgieva said in a speech before the spring meetings of the IMF and the World Bank. The leader did not disclose the growth projections that will be published for each country next Tuesday.

However, it indicates that “the economy of most countries will remain in positive territory”. In other words, IMF economists do not expect a recession at this time. However, “the impact of the war on Ukraine will contribute to this year’s lowering of growth forecasts of 143 countries representing 86% of world GDP”, Kristalina Georgieva indicated.

“Disaster” projections for Ukraine

Moreover, the situation varies greatly from one country to another. The economic projections for Ukraine are so “catastrophic” and the forecast of Russia’s GDP recession is “severe”, warns the leader. He also noted that the level of uncertainty surrounding the latest IMF forecast is far beyond the “normal” level because the war in Ukraine and sanctions could rise further as the new fierce variants of Covid- 19 is likely to appear.

The risk is largely set by high inflation in the long run and is thus more difficult to prevent. After a decade of almost silent inflation, worldwide prices began to rise last year as the world’s population continued heavy consumption after the economic paralysis caused by the Covid-19 pandemic in 2020.

In recent weeks, Russia’s invasion of Ukraine and the sanctions imposed on Moscow have led to rising fuel and food prices. Ukraine and Russia are major grain producers, and Russia is also a major source of energy for Europe. The economic effects are therefore felt far beyond the Central and Eastern European region.

“Fragmentation”

Inflation, which has risen for four decades in the United States, is “currently a real danger” for many countries and is hitting the hardest hardest, Georgieva lamented in this speech given at the Carnegie Endowment for International Peace in Washington. , a think tank, noted that the trend is likely to last longer than expected. “It’s a huge drag on the global recovery,” he added.

It also greatly complicates the work of policy makers because by raising their interest rates, major central banks are increasing the borrowing costs of emerging and developing countries, which are extremely indebted. “This is the most complex political environment of our time”, also said Kristalina Georgieva, who called on monetary institutions to “act decisively”.

Ending war and pandemics are top priorities to ensure prosperity, the leader also stressed. Finally, he warns about the “increasing fragmentation of the world economy into geopolitical blocs” that is detrimental to the ability to deal with current and future crises. This is to lead to a “tectonic shift” that will reshape global supply chains, for example.

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