Even if the war ends soon, the loss of life, destruction of physical capital and the exodus of citizens will severely impede activity for several years to come.”
World Economic Outlook.
Russia’s invasion of Ukraine will reduce the growth capacity of the world economy and the International Monetary Fund (IMF) estimates that in a base scenario, the world’s GDP will achieve an advance of 3.6% this and next year.
This forecast is lower than the 4.4% forecast in January for 2022 and 3.8% for 2023, and also incorporates the expectation that governments have little room to apply countercyclical policies.
Inside the World Economic Outlook (WEO), they stressed that “unusually high uncertainty remains about these risk-driven forecasts.” The uncertainty is dominated by the duration of the war, the escalation of sanctions against Russia, the tension in the market and new outbreaks of Covid-19
While the economy is slowing down, inflation is being pushed upwards, so that the organization’s experts expect an annual variation of 5.7% in general prices in advanced economies and 8.7% among emerging economies.
The economic adviser and director of the Department of Economic Studies of the IMF, Pierre Olivier Gourinchas, stressed that the risk of a world disembedding of expectations will fuel a more aggressive response from central banks.
This reaction may exert additional pressure on emerging economies, by tightening the conditions for access to international financing at a time when the debt has grown significantly.
The Economic Counselor of the IMF admitted that the organization developed an adverse scenario led by the increase in energy prices, greater risk aversion and volatility in the financial markets. Under these conditions, the world economy will lose two growth points over the base scenario of 3.6 percent.
But even in this context, it will experience positive growth, underlined the deputy director of the Department of Economic Studies, Petya Koeava.
US, China and Europe impacted
The organization’s experts anticipate growth of 3.7% for the United States, an expectation that contrasts with the 4% forecast in January, and which reflects the faster withdrawal of monetary support. It also shows the impact of lower growth of trading partners
The organization’s experts warned that the performance of the US GDP will be reduced to 2.3% for the coming year, a rate that incorporates a cut of three tenths of a point.
For China, the second largest economy in the world, they foresee a growth of 4.4%, lower than the 4.8% projected at the beginning of the year, and they anticipate an acceleration to 5.1% by 2023.
According to forecasts, the European Union will register an advance of 2.8% in its GDP this year, a more moderate rate of 3.9% that the agency anticipated in January and for 2023, they adjusted their forecast to 2.3% from 2.5% previous.
Emerging AL
In the document they projected that the performance of Mexico estimated at 2% and Brazil at 0.8% will favor a growth of 2.5% in the GDP of Latin America and the Caribbean. Regional advance that contrasts with 2.4% estimated in January.
For Russia and Ukraine, which are leading the war that fuels uncertainty for world growth, the IMF forecasts deep economic contractions.
For Ukraine they project an economic contraction of 35% this year and for Russia they estimate a contraction of 8.5% in a base scenario.