War in Ukraine will lead to significant slowdown in global economy: IMF


The International Monetary Fund on Tuesday said the war in Ukraine will lead to a significant slowdown in global economic growth this year..

But the agency is not forecasting recession or stagflation for the U.S. or Europe.

The IMF said global growth would slow to a 3.6% rate this year, down from 6.1% in 2021 and 0.8 percentage points lower than in the last forecast in January. Still 3.5% growth is in line with long-run trends.  

The IMF said the risks of things turning out worse than expected were larger than the chances of a rosier scenario. 

The U.S. economy is expected to grow at a 3.7% rate this year, down from the prior estimate of 4%. 

Country Projected 2022 growth Projected 2023 growth 2022 difference from prior forecast 2023 difference from prior forecast
World Output 3.6% 3.6% -0.8 -0.2
U.S. 3.7% 2.3% -0.3 -0.3
Euro Area 2.8% 2.3% -1.1 -0.2
Germany 2.1% 2.7% -1.7 0.2
UK 3.7 1.2 -1.0 -0.5
China 4.4 5.1 -0.4 -0.1
Russia -8.5 -2.3 -11.3 -4.4
Japan 2.4 2.3 -0.9 0.5
India 8.2 6.9 -0.8 -0.2
Brazil 0.8 1.4 0.5 -0.2
Canada 3.9 2.8 -0.2 0.0
Saudi Arabia 7.6 3.6 2.8 0.8

A deep contraction is forecast for Russia due to sanctions and the decision by European nations to scale back energy imports.

“Overall risks to economic prospects have risen sharply and policy trade-offs have become even more challenging,” said Pierre-Olivier Gourinchas, the IMF’s chief economist. 

With the impact of Russia’s invasion of Ukraine and a broadening of price pressures, inflation is expected to remain elevated for longer than previously forecast.

For 2022, inflation is now projected at 5.7% in advanced countries, 1.8 percentage point higher than previously forecast.

This has led central banks to tighten monetary policy and indicate increasingly hawkish future stances.

“Tighter financial conditions will shine a harsh spotlight on debt vulnerabilities among sovereign and corporate borrowers,” the IMF said.

The risk that China’s economy could slow down more than currently projected was another concern.

The IMF trimmed its forecast for China growth this year to 4.4%, down from 4.8% previously.

This article was originally published by Marketwatch.com. Read the original article here.

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