Managing Director Kristalina Georgieva cites pressure on food and energy prices as well as deteriorating household and business confidence.
The war in Ukraine is slowing global growth, IMF Managing Director Kristalina Georgieva warned on Thursday, citing pressure on food and energy prices as well as deteriorating household and business confidence.
“To sum up, we have a tragic impact of the war on Ukraine. We have a significant contraction in Russia and we see the likely impact on our outlook for the global economy,” she said during a roundtable with some journalists.
She has already indicated that next month, at the spring meetings of the International Monetary Fund and the World Bank, a drop in “global growth projections” should be expected, without however advancing any figures.
In January, the IMF forecast had already been reduced to 4.4% for 2022, once morest 4.9% in October and nearly 5.9% last year.
The world economy has not yet recovered from the Covid-19 pandemic which was already “a crisis like no other”, which it is going through “even more shocking ground”, commented Ms Georgieva. “The unthinkable is happening, we have a war in Europe,” she said.
Regarding the impact on Russia, the leader of the Fund stressed that the “unprecedented” sanctions imposed by the allied countries lead to “a sharp contraction of the Russian economy” and even “a deep recession”.
She described the effects in Russia: from the massive depreciation of the currency that drives up inflation to the plummeting purchasing power and standard of living of a large majority of the Russian population.
“The spillovers to neighboring countries are also significant, especially countries that are more closely integrated with the Ukrainian and Russian economy,” she said, citing Central Asian countries, Moldova and the Baltics. .
A default by Russia “is no longer an unlikely event”, she continued, while noting that the problem was not the availability of money but the inability to use it since the country was cut off from the global financial system.
Already visible impacts
“I’m not going to speculate on what may or may not happen, but just to say that we are no longer talking regarding Russia’s default as an unlikely event,” she further commented.
She insisted that the Washington institution had no program with Moscow. She, on the contrary, insisted that the IMF stood ready to help Ukraine further. On Wednesday, the institution had approved aid of 1.4 billion dollars.
This is little compared to the cost of the damage of this conflict, estimated for the time being at 100 billion dollars, indicated Thursday Oleg Ustenko, the economic adviser to the Ukrainian president.
Beyond Russia and Ukraine, the effects on the rest of the world are already palpable.
Everywhere in the world, the population is suffering from the rise in the prices of raw materials and energy. And, it undermines trust. Because this price surge comes when inflation was already high due to demand and supply problems caused by the pandemic.
This raises “serious concerns in many places around the world,” Ms Georgieva observed. “It’s especially dangerous for families living in poverty, for whom food and fuel represent the bulk of their expenses.”
“When we look at the real economy, we clearly see a contraction in trade as well as an erosion of consumer confidence and purchasing power,” she also described.
All of this is likely to lead to interest rates rising faster than expected, which will further affect developing and heavily indebted poor countries.
