On Tuesday, the International Monetary Fund (IMF) lowered the world economic outlook for this year and next, accusing Russia’s war in Ukraine of disrupting global commerce, pushing up oil prices, threatening food supplies and increasing the uncertainty that coronavirus and its variants have exacerbated.
The 190 country lender lowered its forecast for global economic growth this year to 3.6%, down sharply from 6.1% last year and 4.4% in 2022 expected in January. It also said that the global economy is expected to grow by 3.6% again next year, slightly lower than the 3.8% forecast in January.
The Canadian economy is expected to grow by 3.9% this year and fall to 2.8% in 2023.
The war – and the bleak outlook – comes as the global economy appears to be shaking off the effects of the highly contagious Omicron variant.
“War will slow economic growth and increase inflation,” Pierre Olivier gourinchas, chief economist of the International Monetary Fund, told reporters on Tuesday.
Now, the International Monetary Fund predicts that the Russian economy hit by sanctions will shrink by 8.5% this year and Ukraine will shrink by 35%.
U.S. economic growth is expected to decline from 4% this year to 3.7% and from 5.7% in 2021, the best year for the U.S. economy since 1984. The factor hindering US economic growth this year will be the increase of interest rates by the Federal Reserve to curb the rise of inflation and the economic slowdown of major US trading partners.
Europe, which relies heavily on Russian energy, will bear the brunt of the economic consequences of the Russian Ukrainian war. The International Monetary Fund (IMF) predicts that the overall growth rate of 19 eurozone countries in 2022 will be 2.8%, far lower than 3.9% in January and 5.3% last year.
The International Monetary Fund predicts that China’s economy will be the world’s second-largest economy, and its growth rate will fall to 4.4% this year from 8.1% in 2021. The zero COVID-19 strategy in Beijing means a severe blockade in the bustling commercial city of Shanghai and Shenzhen.
Oil producers set to do better than most
Some commodity exporters, benefiting from rising raw material prices, may ignore the trend of slowing growth. For example, the international monetary fund raised its growth forecast for oil producer Nigeria to 3.4% this year from 2.7% in January.
The world economy rebounded with amazing strength from the brief but cruel coronavirus recession in 2020. But the rebound itself has also brought some problems: enterprises are unprepared and rush to meet the surge in customer orders, which has overwhelmed factories, ports and freight yards. The result: long-term transportation delays and higher prices.
The International Monetary Fund (IMF) predicts that consumer prices in the world’s developed economies will rise by 5.7% this year, the highest level since 1984. In the United States, inflation has reached its highest level in 40 years.
Central banks are raising interest rates in response to rising prices, which could curb economic growth. The Russian Ukrainian war has pushed up the prices of oil, gas and other commodities, making it more difficult for them to maintain economic recovery while fighting inflation.
The International Monetary Fund pointed out that the conflict also triggered the largest refugee crisis in Europe since World War II, reduced the prices of fertilizer and food produced by Russia and Ukraine, and threatened food security in Africa and the Middle East. In a speech last week, IMF President Kristalina Georgieva warned of the threat of “more hunger, more poverty and more social unrest”