“In just a few weeks, the world has experienced yet another major, transformative shock,” Gourinchas said. “Just as a lasting recovery from the global economic meltdown caused by the pandemic seemed in sight, the war has created the very real prospect that much of recent gains will be wiped out.”
The war in Ukraine will “seriously” set back the global recovery from Covid-19, according to the IMF, which forecast global growth of 3.6 percent for 2022 and 2023 – down from 0.8 and 0.2 percent respectively its January forecast.
The organization forecast growth of 2.9 percent in the European Union this year, 1.1 percentage points less than forecast in January. US expansion for 2022 is forecast at 3.7 percent, up from 4 percent in January. Russia’s economy will shrink by 8.5 percent, according to the IMF, which forecast the country’s growth of 2.8 percent in January. China’s production is expected to grow 4.4 percent this year, compared to the 4.8 percent forecast in January.
The war has exacerbated inflationary pressures and threatened supplies of key commodities. Russia is a major supplier of oil and metals, and Russia and Ukraine together supply wheat and corn – commodities whose prices have risen sharply in the wake of the invasion.
“There is a rising risk that inflation expectations will become unanchored, prompting a more aggressive tightening response from central banks,” the IMF said. “In emerging and developing countries, rising food and fuel prices could significantly increase the risk of social unrest.”
The longer-term humanitarian impact of the invasion is also likely to create discord, the IMF warned, as “large flows of refugees can exacerbate already existing social tensions and fuel unrest.”
