Russia’s war in Ukraine could ‘fundamentally change’ global economic, political order – IMF
WASHINGTON: Russia’s invasion of Ukraine will hit the entire global economy with slowing growth and accelerating inflation and could radically reshape the global economic order in the long term, the International Monetary Fund (IMF) said on Tuesday. said.
Beyond human suffering and historical refugee flows, war is driving up prices for food and energy, fueling inflation and reducing the value of income, while disrupting trade, supply chains and remittances to Ukraine’s neighboring countries. is disrupting, the IMF said in a post on its website.
It is also undermining business confidence and creating uncertainty among investors, which will lower asset prices, strengthen financial conditions and trigger capital outflows from emerging markets, it said.
“The conflict is a major blow to the global economy that will hurt growth and drive up prices,” the IMF said.
IMF officials have already said they expect the fund’s previous forecast for global economic growth to be lower by 4.4 percent in 2022. In Tuesday’s post, he suggested that his regional growth forecasts also be revised downwards.
The IMF is scheduled to issue an updated forecast on April 19.
Countries with direct trade, tourism and financial exposure will feel increasing pressure, the IMF said, citing a greater risk of unrest in some regions from sub-Saharan Africa and Latin America to the Caucasus and Central Asia.
At the same time, food insecurity was likely to worsen in parts of Africa and the Middle East, where countries such as Egypt import 80 percent of their wheat from Russia and Ukraine.
In the long term, it said, “war could fundamentally alter the global economic and geopolitical order, altering energy trade, reconfiguring supply chains, fragmenting payment networks, and requiring countries to reconsider reserve currency holdings.” should do.”
The IMF predicted deep recessions in Ukraine and Russia, and said Europe could see disruptions in natural gas imports and widespread supply-chain disruptions. Eastern Europe, which has absorbed most of the 3 million people who fled Ukraine, will see higher financing costs as a result.
The IMF said countries with close trade and payment system links with Russia in the Caucasus and Central Asia would be more affected by its slowdown and sanctions imposed since Ukraine’s invasion, curbing trade, remittances, investment and tourism. Moscow called its actions in Ukraine a “special operation”.
In the Middle East and Africa, deteriorating external financing conditions could increase capital outflows and add to growth barriers for countries with high debt levels and large financing needs, the IMF said.
High energy and food prices, low tourism and problems accessing international capital markets will threaten countries in sub-Saharan Africa, which imports about 85 percent of their wheat supply with a third coming from Russia or Ukraine.
Food and energy prices are the main channels for spillover in the Western Hemisphere, with higher commodity prices likely to accelerate already high inflation rates in Latin America, the Caribbean and the United States.
The IMF said that in Asia, the biggest impact would be felt among marginal economies, including oil importers of ASEAN economies, India and some Pacific islands, while new fuel subsidies could lessen the effects in Japan and Korea.