Prospects for the development of the world economy. IMF report April 2022
The global economic outlook has deteriorated significantly since the latest forecast of the International Monetary Fund "World Economic Outlook" in January.
At that time, IMF experts predicted an intensification of the global economic recovery from the second quarter of this year after a short exposure to the omicron option.
Subsequently, the outlook has deteriorated, mainly as a result of fighting in Ukraine, which has triggered a humanitarian crisis in Eastern Europe.
Before this happened, the world economy was on the mend. Although not yet fully recovered from the COVID-19 pandemic and with a significant divergence between the recovery trajectories of advanced economies on the one hand and emerging market and developing economies on the other.
China's frequent and widespread lockdowns, including in major industrial centers, have also slowed down activity in the country and could create new bottlenecks in global supply chains.
Stronger, broader and more sustained price pressures have also led to monetary tightening in many countries. Overall, the risks to the economic outlook have risen sharply, and policy compromises have become even more difficult to find.
The IMF April report forecasts global growth at 3.6 percent in 2022 and 2023, 0.8 and 0.2 percentage points below the January forecast, respectively. This downgrade mainly reflects direct implications for Russia and Ukraine and global spillovers.
Both Russia and Ukraine are projected to see a significant decline in GDP in 2022. The severe recession in Ukraine is a direct consequence of the invasion, destruction of infrastructure and mass migration of the population. In Russia, such a sharp decline is associated with the consequences of sanctions, accompanied by a breakdown in trade ties, a serious weakening of financial intermediation in the country and a loss of confidence.
The economic consequences are everywhere. Since Russia is a major supplier of oil, gas and metals, as well as, along with Ukraine, wheat and corn, the ongoing and expected reduction in the supply of these goods has already caused their prices to rise sharply.
The countries of Europe, the Caucasus and Central Asia, the Middle East and North Africa are most affected by it. Rising food and fuel prices will hurt low-income households around the world, including in the Americas and Asia.
Through tightly integrated global supply chains, production failures in one country can cascade around the world very quickly. Businesses in Russia and Ukraine are supplying specialized manufacturing inputs, and shortages of some of these are already affecting European automakers.
Some countries in Eastern Europe and Central Asia are closely linked to Russia through trade and remittance flows. Economic activity expected to weaken in these countries.
The forced displacement of more than 4 million Ukrainians to neighboring countries, primarily to Poland, but also to Romania, Moldova and Hungary, will also increase economic difficulties in the region.
In many countries, inflation has become one of the main problems. In some advanced economies, including the US and some European countries, it has reached its highest level in more than 40 years in tight labor markets. The risk of losing control over inflationary expectations is growing, prompting central banks to tighten policy more aggressively.
In emerging market and developing countries, rising food and fuel prices can greatly increase the risk of social unrest.
The economic damage from the military confrontation will lead to a significant slowdown in global economic growth in 2022. A sharp double-digit fall in Ukraine's GDP and a significant economic contraction in Russia are more than likely, with spillovers spreading around the world through commodity markets, trade and financial channels.