The International Monetary Fund slashed its world growth forecast by the most since the early months of the Covid-19 pandemic, and projected even faster inflation, after Russia invaded Ukraine and China renewed virus lockdowns.
Global expansion will slow to 3.6% in 2022, down from a forecast of 4.4% in January before the war, the IMF said in an update to its World Economic Outlook released on Tuesday. That compares with 6.1% growth in 2021. The institution also lowered its projection for 2023 to 3.6% from a prior 3.8%.
The Washington-based fund expects Ukraine’s economy to contract 35% in 2022 as a direct result of the invasion. Russia’s output may shrink 8.5% due to sanctions imposed by western nations and a loss of confidence in the country. The war is causing the fund to lower gross domestic product expectations for 143 of its member economies – a group that accounts for 86% of global output, managing director Kristalina Georgieva said last week.
The US is expected to be less affected by the war and grow 3.7% this year, down from a prior 4% projection, reflecting a faster tightening of monetary policy by the Federal Reserve. The IMF’s baseline forecast assumes that the conflict remains limited to Ukraine and that sanctions on Russia and European plans to become independent of Russian energy don’t tighten beyond those announced by the end of March.But unusually high uncertainty surrounds the outlook, and downside risks dominate.
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