War dims global growth prospects
IMF and World Bank have downgraded their global growth forecasts
By Siddhartha Bhattacharya, ATB Economics 26 April 2022 1 min read
The Russian invasion of Ukraine continues to send shockwaves across the global economy.
According to the latest World Economic Outlook released by the International Monetary Fund (IMF) this month, global economic activity is expected to rise 3.6% in 2022 and 2023. These estimates are down 0.8 percentage points for 2022 and 0.2 percentage points for 2023 compared to the IMF’s January forecast.
With Russia and Ukraine headed toward recessionary territory this year, output in the Euro Area is expected to grow by 2.8% in 2022 (down from 3.9% in the January forecast) and 2.3% in 2023 (down from the earlier forecast’s 2.5%). Due to the extensive energy import dependency from Russia along with elevated supply chain disruptions from the war, Germany and Italy are expected to take a 1.7 and 1.5 percentage point hit to their respective economies this year.
Meanwhile, despite the limited direct economic ties between North America and Russia, growth forecasts for the United States and Canada have been shaved by 0.3 and 0.2 percentage points, respectively, for 2022. This is mostly to account for supply chain pressures, tighter monetary policy to battle inflation and subdued demand from trading partners.
The IMF’s economic growth projections in other markets, such as India and Japan, have also been tempered as higher oil prices are expected to weaken domestic demand and net exports in 2022.
The World Bank has also slashed its forecast for global growth citing the war in Ukraine and pandemic-related pressures. After an estimated rebound of 5.7% in 2021, world GDP growth is expected to slow to 3.2% this year, down from its earlier forecast of 4.1%.
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