The war in Ukraine has disrupted the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, boosting food and commodities and exacerbating inflationary pressures globally, according to the most recent United Nations forecast released today.
According to the World Economic Situation and Outlook (WESP) in mid-2022, the global economy is expected to grow by just 3. 1% in 2022, below the 4. 0% expansion forecast published in January 2022. Global inflation is forecast to be 6. 7% in 2022, double the 2010-2020 average of 2. 9%, with sharp increases in food and energy prices.
Downward revisions to expanding customers are widespread, with the world’s largest economies (the United States, China, and the European Union) and most other evolved and emerging economies in addition. Growing customers are weakening in emerging commodity-importing economies, driven by higher energy and food prices. The outlook is compounded by worsening food insecurity in Africa.
“The war in Ukraine, in all its dimensions, is triggering a crisis that is also devastating global energy markets, disrupting monetary systems and exacerbating the excessive vulnerabilities of the world ahead,” UN Secretary-General António Guterres said.
He added: “We want swift and decisive action to secure a food and energy stable in open markets, lifting export restrictions, allocating surpluses and reserves to those in need, and addressing rising food values to calm market volatility. “
In addition to the tragic loss of many lives and the unfolding humanitarian crisis, the war is taking a heavy toll only on the economies of the Russian Federation and Ukraine, but also on the neighbouring economies of Central Asia and Europe, in addition to the European Union. .
The sharp rise in energy costs represents a significant negative terms-of-trade surprise for the European Union, which in 2020 imported 57. 5% of its total energy consumption. Expansion customers of the European Union economy have weakened considerably and GDP is expected to grow by just 2. 7% in 2022, to the 3. 9% previously forecast in January.
Given that imports from the Russian Federation accounted for almost 25% of Europe’s energy consumption in 2020, a sudden halt to the Russian Federation’s oil and herbal fuel flows would most likely increase energy costs and exacerbate inflationary pressures. EU Member States in Eastern Europe and the Baltic region are severely affected, as they are already experiencing inflation rates well above the EU average.
High inflation reduces real household incomes, especially in emerging countries, where poverty is more widespread, wage expansion remains limited, and fiscal support to mitigate the impact of emerging oil and food costs remains limited.
High food and energy costs are affecting the rest of the economy and pose an additional challenge to an inclusive recovery, disproportionately affecting low-income families who spend a much larger percentage of their income source on food.
Monetary tightening in the United States is also expected to raise loan prices and widen financing gaps in emerging countries, adding to less developed countries. Tighter external economic conditions will adversely affect the outlook for expansion, especially for countries with higher exposure to global capital markets facing debt problems or default risks. “Developing countries will want to prepare for the effect of the Fed’s competitive economic adjustment and put in place appropriate macroprudential measures to stop sudden outflows and stimulate productive investment,” said Hamid Rashid, head of the global UN. Economic surveillance service. Department of Economic and Social Affairs (DESA) and lead draftsman of the report.
The war in Ukraine is taking place at a time when global CO2 emissions are at an all-time high. By raising energy prices, the shock will have a significant impact on global efforts to tackle the climate emergency.
As countries look to build energy materials amid high oil and fuel costs, fossil fuel production is expected to increase in the short term. High costs of nickel and other metals can hurt electric vehicle production, while emerging food costs can restrict the use of biofuels.
“However, countries can also address their energy and food security considerations, brought to the forefront by the crisis, by accelerating the adoption of renewable energy and increasing efficiency, thus strengthening the fight against climate change,” said Shantanu Mukherjee, Director of UN DESA. Politics and economic analysis.
Photo: Sambrian Mbaabut/World Bank