IMF warns Russia-Ukraine war will slow economic growth, increase inflation

International Monetary Fund (IMF) has said that global economic growth has been severely impacted by war between Russia and Ukraine. IMF noted that global economy has not fully recovered from COVID-19 pandemic and some countries were facing inflation even before war. IMF, in a blog, stated that in comparison to January forecast, projection for global growth has been revised downwards to 3.6 % in both 2022 and 2023, which indicates direct impact of war on Ukraine and sanctions on Ukraine, "with both countries projected to experience steep contractions."  IMF has warned that war will slow growth of economy and increase inflation.

According to IMF, growth outlook for European Union has been revised downward by 1.1 percentage points due to indirect effects of war and economic risks have witnessed a sharp increase and policy treoffs have become more challenging. IMF, in blog, pointed out that war has impacted supply of commodities and will have its effects on commodity markets and tre.

According to IMF, reduction in supplies of se commodities has led to a sharp increase in prices. IMF, in report, stated that commodity importers in Europe, Caucasus and Central Asia, Middle East and North Africa, and sub-Saharan Africa have been most affected and rise in food and fuel price will impact lower-income households globally. 

"Inflation has become a clear and present danger for many countries. Even prior to war, it surged on back of soaring commodity prices and supply-demand imbalances," IMF said in blog. 

"We now project inflation will remain elevated for much longer. In United States and some European countries, it has reached its highest level in more than 40 years, in context of tight labour markets," IMF noted. 

War causes more permanent fragmentation of world economy: IMF

International Monetary Fund noted that war between Russia and Ukraine causes an increase in risk of "more permanent fragmentation of world economy into geopolitical blocks with distinct technology standards, cross-border payment systems, and reserve currencies." It noted that shift would le to efficiency losses, increase volatility and present a challenge to rules-based framework.

IMF highlighted that policymakers need to ensure that global financial safety net continues to function effectively. According to IMF, some countries need to ensure appropriate liquidity support to tide over short-term refinancing problems while ors need comprehensive sovereign debt restructuring. IMF has me predictions about economy as war between Russia and Ukraine continues for more than 70 days. 

(Image: AP)