The war in Ukraine weighs down the world economy

The Russian invasion of Ukraine and the aggravation of inflationary pressures caused by the war will deduct nearly one point from the growth of the world economy in 2022, according to the latest estimate by the International Monetary Fund (IMF), which calculates that production will increase by 3.6% this year, compared to the 4.4% estimated in Januaryand the same in 2023.

This is reflected in its latest report on World Economic Outlookwhich is published this Tuesday, just before the start of the spring meeting of the IMF and the World Bank, and which warns that “this crisis appears while the global economy was walking towards recovery, but had not yet fully recovered of the COVID-19 pandemic, with a significant divergence between advanced countries and emerging and developing economies”.

The IMF analysis draws a context plagued with uncertainties, from financial volatility to the withdrawal of fiscal and monetary stimuli, through the slowdown in the Chinese economy or the threat that COVID-19 still poses to many countries. But the risks are concentrated in the war and in the tensions that are already causing price increasesespecially raw materials and energy products.

“Inflation is expected to remain elevated for longer than previously expected, fueled by war-driven commodity price hikes and widening price pressures,” reads the text, indicating that this year expects inflation of 5.7% in advanced economies and 8.7% in emerging and developing economies.

The biggest impact, in Europe

All this materializes in much lower growth than expected just a few months ago or, in the case of the belligerent countries, in a clear setback. Thus, the IMF estimates that Russia’s economy will contract by 8.5%when in January it expected a growth of 2.8%, punished by the impact of the sanctions, which have caused “rupture of commercial ties, deep disturbances of internal financial intermediation and loss of confidence”.

For Ukraine an economic contraction of at least 35% is predicted, although the Fund recognizes the difficulty of evaluating the situation with open conflict. “The serious collapse of Ukraine is the direct result of the invasion, the destruction of infrastructure and the exodus of the population,” the report said.

In any case, all of Europe will suffer the consequences of the war, starting with its main economic engines: the forecast for Germany it falls 1.7 points, to 2.1%; Italy it leaves 1.5 points and will grow 2.3%; Y United Kingdom discount one point, up to 3.7%.

Spain also sees its forecast cut by one point, although its growth will be the highest in all of Europe with the exception of Ireland, 4.8%, while France suffers a relatively moderate reduction, of 0.6 points, to place itself at a GDP increase of 2.9%.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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