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War in Ukraine: IMF lowers its global growth forecast for 2022 to 3.6%

2022-04-19T13:31:22.330Z


The international body compares the conflict launched by Russia to effects similar to “seismic waves emanating from the epicenter of an earthquake”


Effects similar to "

seismic waves emanating from the epicenter of an earthquake

": the war in Ukraine has considerably darkened the outlook for the world economy, warned Tuesday Pierre-Olivier Gourinchas, the new chief economist of the Fund international currency.

The IMF, which published its updated forecasts at its spring meetings, now expects global growth of 3.6% this year against 4.4% in January.

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"

The conflict and the sanctions directly affect Ukraine, Russia and Belarus

", explain the economists of the Washington institution.

"

But the international fallout spreads far beyond, particularly in Europe, via commodity prices, commercial and financial links, supply (of food and energy products, editor's note) and the humanitarian impact

".

Because Ukraine and Russia are important grain producers for many countries, and Russia is also a key source of energy for Europe.

The IMF has therefore revised downwards the economic forecasts of an overwhelming majority of countries.

Thus, GDP growth in the United States was reduced to 3.7% (-0.3 points).

This new projection takes into account "

the faster than expected withdrawal of monetary support to contain inflation as well as the impact of weaker growth of their trading partners (...) resulting from the war

" in Ukraine, has detailed the IMF.

The Chinese economy is suffering from the zero tolerance policy towards the pandemic which has led to numerous confinements, including that of the economic capital, Shanghai.

Growth should thus fall to 4.4% (-0.4 points) after 8.1% last year.

A weakened euro zone

For the countries of the euro zone, the deterioration is even greater: +2.8% against +3.9% in January.

Germany, which depends heavily on Russia for energy supplies, sees its forecast cut by 1.7 points to 2.1%.

Because they are energy importers, the rise in world prices represents a negative shock

,” summarizes the IMF.

Growth in France was reduced to 2.9%, that of Italy to 2.3%.

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For Russia, which invaded Ukraine on February 24, it's a plunge: its GDP will contract by 8.5%.

Despite the sanctions against Moscow, it is above all the Ukrainian economy which is collapsing: -35% expected this year, given the massive destruction which has caused millions of people to flee.

And, it will take years for the country to recover from this conflict even if it stopped immediately.

Elsewhere in the world, oil-exporting countries are doing well on the back of rising prices.

Saudi Arabia's growth forecast thus reaches 7.6% (+2.8 points).

Skyrocketing inflation

Overall, the impact of the war in Ukraine is all the stronger as it occurred when the economy was not fully recovered from the pandemic.

The conflict also exacerbates the dizzying rise in prices.

The IMF expects inflation of 5.7% this year for advanced countries (+1.8 points) and 8.7% (+2.8 points) for emerging and developing economies.

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The peak should be reached this year, he says.

But even in 2023, inflation should still be above central bank targets in advanced countries and remain very high in emerging and developing countries (6.5%).

The IMF, which has also downgraded the outlook for global growth for 2023 (+3.6%, -0.2 point), warns of the multitude of clouds on the horizon.

"

Overall, the risks are (...) comparable to the situation at the start of the pandemic

," he said.

Social unrest in perspective?

The first risk is the stalemate of the war, the worsening of the humanitarian crisis and the sanctions.

Rising prices are also likely to provoke social protests that could be exacerbated in countries hosting large numbers of refugees.

In addition, “

pandemic-induced record debt levels are leaving market and developing economies more vulnerable to interest rate hikes

,” the IMF also notes.

Moreover, a resurgence of the pandemic is not excluded.

Finally, “

the fracture in international relations could undermine the trust and cooperation essential to meeting long-term challenges, in particular climate change

”, worries the IMF.

Source: lefigaro

All news articles on 2022-04-19

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