Citing Russia’s war, IMF lowers global growth forecast to 3.6%

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WASHINGTON (AP) — The International Monetary Fund on Tuesday downgraded the outlook for the world economy this year and next, blaming Russia’s war in Ukraine for disrupting global trade, pushing up oil prices, threaten the food supply and increase the uncertainty already heightened by the coronavirus and its variants.

The 190-country lender cut its forecast for global growth to 3.6% this year, a sharp drop from 6.1% last year and the 4.4% growth it forecast for 2022 in January. He also said he expects the global economy to grow a further 3.6% next year, slightly lower than the 3.8% it forecast in January.

The war – and the darkening outlook – came just as the global economy appeared to be shedding the impact of the highly contagious omicron variant.

“In the space of a few weeks, the world has once again experienced a major and transformative shock,” wrote the IMF’s chief economist, Pierre-Olivier Gourinchas, in the foreword to the Outlook report. the fund’s global economy. “Just as a sustained recovery from the pandemic-induced global economic collapse has appeared in sight, the war has created the very real prospect that much of recent gains will be erased.”

Now the IMF expects the sanctions-battered Russian economy to shrink by 8.5% this year and Ukraine’s by 35%.

US economic growth is expected to fall to 3.7% this year, from 5.7% in 2021, which had been the fastest growth since 1984. The new forecast marks a downward revision from the 4% that the IMF had predicted at the beginning of the year. US growth hampered this year will be interest rate hikes by the Federal Reserve, intended to combat rising inflation, and an economic slowdown in major US trading partners.

Europe, heavily dependent on Russian energy, will bear the brunt of the economic fallout from the Russian-Ukrainian war. For the 19 countries that share the euro currency, the IMF predicts collective growth of 2.8% in 2022, down sharply from the 3.9% it forecast in January and 5.3% last year. .

The IMF expects growth in China’s economy, the world’s second largest, to slow to 4.4% this year from 8.1% in 2021. Beijing’s zero COVID strategy has led to shutdowns draconian in bustling commercial cities like Shanghai and Shenzhen.

The global economy had rebounded with surprising strength from the brief but brutal coronavirus recession of 2020. But the rebound presented its own problems: Taken by surprise, businesses rushed to meet a surge in customer orders, which overwhelmed factories, ports and freight stations. The result: long shipping times and higher prices.

The IMF predicts a 5.7% rise in consumer prices in the world’s advanced economies this year, the highest since 1984. In the United States, inflation is at its highest level in four decades.

Central banks are raising interest rates to counter rising prices, a move that could stifle economic growth. By driving up the prices of oil, natural gas and other commodities, the Russian-Ukrainian war has made their task of fighting inflation while preserving economic recovery even more difficult.

The conflict has also ‘triggered Europe’s biggest refugee crisis since World War II,’ the IMF noted, and cut supplies and raised prices for fertilizers and grain produced in Russia and Ukraine, threatening security. food in Africa and the Middle East. In a speech last week, IMF Managing Director Kristalina Georgieva warned of the threat of “more hunger, more poverty and more social unrest”.

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