FILE – The International Monetary Fund logo is seen at their building in Washington, Monday, April 5, 2021.
Highlight
- The International Monetary Fund on Tuesday downgraded the outlook for the world economy this year.
- The IMF blamed Russia’s war in Ukraine for disrupting global commerce, pushing up oil prices.
- It also said it expected the world economy to grow by 3.6 percent again next year.
The International Monetary Fund on Tuesday downgraded the outlook for the world economy this year and next, citing increased uncertainty already posed by the coronavirus and its variants, disrupting global commerce, raising oil prices, jeopardizing the food supply. Blamed Russia’s war in Ukraine for escalating. The 190-country lender lowered its forecast for global growth this year to 3.6 per cent, a steep drop from last year’s 6.1 per cent and the 4.4 per cent growth it expected in January to 2022.
It also said it expects the world economy to grow again at 3.6 percent next year, slightly slower than the 3.8 percent forecast in January. The war – and the bleak outlook – came just as the global economy appeared to shake off the effects of the highly infectious Omicron variant. “The war will slow economic growth and increase inflation,” IMF chief economist Pierre-Olivier Gourinches told reporters on Tuesday.
Now, the IMF expects Russia’s economy – battered by sanctions – to shrink 8.5 percent this year and Ukraine’s by 35 percent. US economic growth is expected to fall this year to 3.7 percent from 5.7 percent in 2021, the fastest growth since 1984. The new forecast indicates a decline from the 4 percent that the IMF had predicted at the beginning of the year. ,
Halting US growth this year will be a Federal Reserve interest rate hike aimed at countering resurgent inflation and an economic slowdown in major US trading partners. Europe heavily dependent on Russian energy will bear the brunt of the economic fallout from the Russo-Ukraine war. For the 19 countries sharing the euro currency, the IMF forecasts a collective growth of 2.8 percent in 2022, sharply lower than the 3.9 percent expected in January and 5.3 percent last year.
The IMF expects the growth of the world’s second-largest Chinese economy to slow to 4.4 percent this year from 8.1 percent in 2021. Beijing’s zero-COVID strategy has meant stricter lockdowns in bustling commercial cities such as Shanghai and Shenzhen.
Some commodity-exporting countries, likely to benefit from rising raw material prices, are likely to avert a slowing growth trend. For example, the IMF raised its growth forecast for oil producer Nigeria – from 2.7 percent this year to 3.4 percent the fund said it expected to return in January.
The world economy had bounced back from the brief but brutal coronavirus recession of 2020 with astonishing strength. But the rebound presented problems of its own: Caught by surprise, businesses scrambled to meet the surge in customer orders, which overwhelmed factories, ports and freight transport. The result: longer shipping delays and higher prices.
The IMF has forecast a 5.7 percent increase in consumer prices in the world’s advanced economies this year, the highest since 1984. In the United States, inflation is running at a four-decade high.
Central banks are raising interest rates to counter rising prices, a move that could stifle economic growth. By raising the prices of oil, natural gas and other commodities, the Russo-Ukraine War has made the task of fighting inflation even more difficult while maintaining economic recovery.
The conflict has also “triggered the largest refugee crisis in Europe since World War II,” the IMF noted, and cut supplies and raised the prices of fertilizers and grains produced in Russia and Ukraine, leading to an increase in Africa and Central America. Food security has been threatened in the past. In a speech last week, IMF Managing Director Kristalina Georgieva warned of the danger of “more hunger, more poverty, and more social unrest”.
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