April 19 (UPI) — The International Monetary Fund said Tuesday it has slashed its worldwide growth projections for 2022 because of the economic impact of Russia’s invasion of Ukraine.
The IMF is projecting a 3.6% GDP rate for the current year and 2023, a drop of 0.8 percentage points in 2022 and 0.2 percentage points the following year. By comparison, global growth reached 6.1% in 2021.
Growth projections in the United States are expected to dip to 3.7% in 2022 after reaching 5.7% the year before. Collectively, the world’s advanced economies are expected to slow from 5.2% to 3.3%.
“Global growth is expected to slow significantly in 2022, largely as a consequence of the war in Ukraine,” the report said. “A severe double-digit drop in GDP is expected in Ukraine due to fighting. A deep contraction is projected for Russia due to sanctions and European countries’ decisions to scale back energy imports.”
The report said the economic costs of war are expected to “spread farther afield through commodity markets” and trades. It noted how much the war has affected fuel and food price around the world.
“This crisis unfolds even as the global economy has not yet fully recovered from the pandemic,” the IMF Chief Economist Pierre-Olivier Gourinchas said in a blog. “Even before the war, inflation in many countries had been rising due to supply-demand imbalances and policy support during the pandemic, prompting a tightening of monetary policy.”
He said the coronavirus restrictions placed in Shanghai, one of China’s largest cities and a critical global seaport, will also reverberate.
“The latest lockdowns in China could cause new bottlenecks in global supply chains,” Gourinchas said. “In this context, beyond its immediate and tragic humanitarian impact, the war will slow economic growth and increase inflation. Overall economic risks have risen sharply, and policy tradeoffs have become even more challenging.”
On Monday, the World Bank said it plans to spend $170 billion to ease a projected worldwide economic slowdown. It said higher food and oil costs, fueled by Western sanctions on Russian energy are to blame, along with projected economic slowdowns across Europe and Central Asia.