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The war in Ukraine and the associated sanctions that countries around the world have imposed on Russia will probably cause a downgrade of the International Monetary Fund’s global economic growth forecast, Kristalina Georgieva, the IMF’s managing director, said on Thursday.
The Ukraine crisis represents another shock to a world economy that was just emerging from the coronavirus pandemic, and it has been compounding global supply chain disruptions and inflation headwinds that have been cause for concern.
The full impact on the world economy remains uncertain, IMF officials said, and will depend on the outcome of the war and how long sanctions remain.
IMF managing director Kristalina Georgieva says the most significant threat to the world economy was greater inflation coming from higher commodity prices as countries shift consumption away from Russian oil and gas.Credit:Bloomberg
“We just got through a crisis like no other with the pandemic, and we are now in an even more shocking territory,” Georgieva told reporters. “The unthinkable happened — we have a war in Europe.”
In January, the IMF reduced its estimated global growth rate for 2022 to 4.4 per cent, from the 4.9 per cent it had projected last year, as a result of slowdowns in the United States and China.
Georgieva said the most significant threat to the world economy was greater inflation coming from higher commodity prices as countries shift consumption away from Russian oil and gas. This, in turn, could eat into consumer spending. Worsening financial conditions and business confidence also have the potential to weigh on growth.
‘We just got through a crisis like no other with the pandemic, and we are now in an even more shocking territory. The unthinkable happened — we have a war in Europe.’
IMF Managing Director Kristalina Georgieva
“The surging prices for energy and other commodities — corn, metals, inputs for fertilisers, semiconductors — they are coming, in many countries, on top of already high inflation and are causing grave concern in so many places around the world,” Georgieva said.
The IMF is working to develop a plan to provide more assistance for Ukraine’s eventual rebuilding effort, but said that it was too soon to know the extent of the country’s needs. This week, the fund’s executive board approved $US1.4 billion ($1.9 billion) in emergency financing.