IMF cuts global growth forecast over Ukraine war
The International Monetary Fund has cut its global growth forecasts because of the war in Ukraine, warning that Russia’s invasion could lead to the fragmentation of the world economy into rival blocs.
In a half-yearly update, the IMF said prospects had worsened “significantly” in the past three months as it reduced its growth estimate for 2022 from 4.4% to 3.6%.
The Washington-based body said every member of the G7 group of leading industrialised nations and the bigger developing countries would grow less rapidly this year than previously expected, and there was a strong risk of an even worse outcome.
“In the matter of a few weeks, the world has yet again experienced a major, transformative shock. Just as a durable recovery from the pandemic-induced global economic collapse appeared in sight, the war has created the very real prospect that a large part of the recent gains will be erased,” said Pierre-Olivier Gourinchas, the IMF’s economic counsellor and director of research.
The UK is expected to be the joint-best performer in the G7 this year despite having its growth estimate cut from 4.7% to 3.7%, but is set to be the worst performer next year when the IMF is pencilling in expansion of just 1.2%. Consumer spending is predicted to be weaker than expected as the cost of living crisis bites while tighter financial conditions are expected to cool investment.
The US will suffer the least damage from the war and has had its growth forecast for 2022 shaved by 0.3 points to 3.7%. Germany and Italy, both more exposed to Russia, have had their growth estimates reduced by 1.7 points and 1.5 points respectively to 2.1% and 2.3%.
Russia is on course for two years of falling output as a result of western sanctions (8.5% this year and
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