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The International Monetary Fund warned on Tuesday that global economic growth will be “severely set back” by the fallout from Russia’s war with Ukraine, the effects of which will be felt “far and wide” as the conflict adds to global pricing pressures and fuels inflation .
“Global economic prospects have been severely set back,” the IMF said.
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The IMF issued a “significant downgrade” to growth projections in its latest World Economic Outlook, predicting global GDP will grow 3.6% in 2022—a marked downgrade from the 4.4% estimated in January and the world’s 6.1% GDP growth in 2021.
The IMF became the latest to predict a “significant slowdown” in global growth this year, as the economic damage from Russia’s invasion of Ukraine has far-reaching consequences around the world.
IMF chief economist Pierre-Olivier Gourinchas warns that disruptions to Russian oil and gas as well as Ukrainian wheat and corn will continue to hit commodities markets “like seismic waves.”
The main reason for the downgrade, according to Gourinchas, is that economic damage from the war in Ukraine will continue to hurt global output and “add to inflation,” especially as fuel and food prices have increased rapidly.
He describes inflation as a “clear and present danger” that is expected to persist for longer in many countries, warning that central banks “need to act decisively” to hike interest rates but make sure that doing so doesn’t hurt economic growth.
Downside risks to global economic growth remain plentiful: Beyond the war in Ukraine and persistent inflation, the coronavirus pandemic continues to present a challenge, while the IMF also warned of potential “financial instability” and “social unrest” amid all the uncertainty.