The IMF cuts its predictions due to the “seismic waves” of war-April 19, 2022 15:00

Andrea Charal

Washington, April 19 (Reuters)-The International Monetary Fund (IMF) said on Tuesday that the direct impact and impact of the war in Ukraine has lowered global growth forecasts, and inflation is now “clear and much more. It is a “very current danger” for the country.

The conflict between Russia and Ukraine has weakened economic activity and encouraged price increases, the organization said in its latest edition of the global economic outlook, exposing its new forecasts to “abnormally high uncertainty.” It is pointed out that.

New sanctions on Russia’s energy sector, widespread armed conflict, a more significant slowdown than expected in China, or a pandemic revival could undermine global slowdown while amplifying inflation. Adds IMF to emphasize that soaring prices can cause society Anxiety in emerging and developing countries.

The fund now expects a global growth of 3.6% in 2022, as in 2023, due to the direct impact of the war on the Ukrainian and Russian economies. And its spillover affects other parts of the world.

Medium-term growth should slow to about 3.3%, compared to an average of 4.1% from 2004 to 2013.

War prolongs a series of shocks over the last few years

“Mainly Russia’s invasion of Ukraine has severely affected the outlook for the global economy,” IMF Chief Economist Pierre Olivier Grinchas wrote in a blog post. It was announced on Tuesday at the same time as the new forecast.

The IMF points out that the war that Moscow continues to present as a “special military operation” has caused one of the worst humanitarian crises in decades, evacuating 5 million people.

Both Ukraine and Russia are expected to experience a sharp contraction in their economies, with European Union growth expected to decline 1.1 points this year and 0.3 points next year compared to January.

“War adds to the series of supply shocks that have hit the global economy in recent years. Like the waves of the earthquake, its effects spill over deeply and far through commodity markets, trade international and financial relations.” Explains Pierre Olivier Grinchas.

Prices for these products have already risen sharply worldwide due to the declining global supply of Russian oil, natural gas, metals and wheat and corn produced in Russia and Ukraine.

The IMF has lowered its interim forecasts for all major regions except net exporters of commodities benefiting from higher prices.

He added that developed countries need more time to recover to pre-pandemic activity levels, their differences from developing countries persist, and they increase the risk of “permanent scars” from the coronavirus crisis.

The “danger” of inflation persists

The IMF emphasized that inflation, driven by rising commodity prices and widespread price pressures, is expected to remain higher than expected, and that widening supply-demand imbalances could exacerbate the situation.

In 2022, he expects inflation of 5.7% in developed and 8.7% in emerging and developing countries to be 1.8 and 2.8 points higher than in January, respectively.

“Inflation is clearly a very present danger for many countries,” writes Pierre Olivier Grinchas.

He explains that the Federal Reserve and many other central banks have already begun to tighten monetary policy, but the consequences of the war are exacerbating inflationary pressures.

Therefore, the IMF raises the risk of not “suppressing” inflation expectations. This is a phenomenon that threatens the credibility of central banks and can therefore accelerate monetary tightening on central banks and bring disadvantages to emerging economies.

Conflicts in Ukraine also increase the risk of permanent fragmentation of the world economy among geopolitical blocks separated by different technical standards, payment systems and even reserve currencies.

“Such’crustal movements’ will cause long-term inefficiencies, increase volatility and pose a major challenge to the rule framework that has governed international and economic relations for 75 years,” Pierre Olivier Grinchas said. I am saying.

(Report Andrea Shalal, French version of Marc Angrand, edited by Tangi Sala√ľn)