The Ukraine war and ensuing sanctions on Russia have led the International Monetary Fund to lower its global economic growth forecast this year for 143 countries, accounting for 86 per cent of the world's output, with widely varying prospects.
Economies facing downgrades include net importers of food and fuel — in Africa, the Middle East, Asia and Europe, Kristalina Georgieva, the IMF's managing director, said on Thursday.
For many exporters of oil, natural gas and metals, rising commodity prices will lift their growth prospects, but they will face higher uncertainty and their gains are insufficient to offset an overall global slowdown driven mainly by the war.
“The outlook has deteriorated substantially, largely because of the war and its repercussions. Inflation, financial tightening and frequent, wide-ranging lockdowns in China — causing new bottlenecks in global supply chains — are also weighing on activity,” the IMF chief said.
“Fortunately, for most countries, growth will still remains in positive territory. That said, the impact of the war will contribute to forecast downgrades for 143 economies this year.”
The IMF chief’s remarks came ahead the spring meetings of the IMF and World Bank scheduled for April 18 to 24.
In January, the Washington-based lender projected global economic growth would reach 4.4 per cent this year, a downgrade of 0.5 percentage point from its October estimates, due to Omicron-related disruptions.
The fund is expected to lower its projections further for 2022 and 2023 in its World Economic Outlook next week as the Russian war in Ukraine sends shock waves throughout the global economy, raising energy and food prices and threatening to further increase inequalities.
“Prospects vary greatly across countries: from catastrophic economic losses in Ukraine, to a severe contraction in Russia, to countries facing spillovers from the war through commodity, trade, and financial channels,” Ms Georgieva said.
The medium-term outlook has also worsened.
For most countries, output is now expected to take even longer to return to its pre-pandemic levels, the IMF chief said.
Emerging markets and developing economies are not only grappling with the impact of the war but also the “scarring effects” of the Covid-19 pandemic, including job losses and education challenges that are borne mostly by women and youth, she said.
“The recovery remains deeply divergent between rich and poor,” Ms Georgieva said.
The IMF chief painted a dire picture of a future marred by weaker growth, rising inflation, concerns about food security and greater hardships for people.
“The outlook is extraordinarily uncertain — well beyond the normal range. The war and sanctions could escalate. New Covid variants could emerge. Crops could fail,” she said.
Inflation, a “clear and present danger” for many countries, is a massive setback for the global economic recovery, she said.
Soaring energy and food prices and supply chain disruptions continue to push up inflation, squeezing real incomes of households around the world.
“For advanced economies, inflation is already reaching a four-decade high. And we now project it to remain elevated for longer than previously estimated,” the IMF chief said.
The Russia-Ukraine conflict has also raised concerns about food security worldwide as the two warring countries used to provide 28 per cent of global wheat exports. Russia and Belarus supplied 40 per cent of exports of potash, which is used primarily in fertilisers.
Food security is a “grave concern” and the world must act immediately with a multilateral initiative to bolster food supplied, the fund warned.
“The alternative is dire: more hunger, more poverty, and more social unrest — especially for countries that have struggled to escape fragility and conflict for many years,” Ms Georgieva said.
Policymakers are facing a tough balance between reining in high inflation and rising debt, while maintaining critical spending and building foundations for sustainable growth.
“We face bigger challenges and more difficult choices,” she said.
The immediate priorities are to end the war in Ukraine, deal with the pandemic and tackle inflation and debt, the IMF said.
Deploying Covid-19 vaccines, tests and antiviral treatments can be done for $15 billion this year, and $10bn each year afterwards, IMF staff analysis showed.
“If we have learned anything from the pandemic, it is that health security is economic security,” Ms Georgieva said.
To address inflation, central banks must act decisively, keeping their finger on the pulse of the economy and adjust policy appropriately, she said.
Developing countries facing higher borrowing costs and risks of capital outflows must consider extending debt maturities and using exchange rate flexibility to foreign exchange interventions and capital flow management measures, she added.
The IMF's lending currently stands at more than $300bn to help its members maintain access to liquidity.
To address mounting debt, countries' spending must be carefully prioritised on safety nets, health and education while ensuring equitable tax policies.
For some countries — especially among the 60 per cent of low-income nations already in or near debt distress — debt restructuring will be required, she said.
The world is facing “a crisis on top of a crisis” with the devastating humanitarian and economic effects of the war following two years of the pandemic, that risks eroding the recovery progress made so far.
“In a world where war in Europe creates hunger in Africa; where a pandemic can circle the globe in days and reverberate for years; where emissions anywhere mean rising sea levels everywhere — the threat to our collective prosperity from a breakdown in global cooperation cannot be overstated,” she said.
SANCTIONED
- Kirill Shamalov, Russia's youngest billionaire and previously married to Putin's daughter Katarina
- Petr Fradkov, head of recently sanctioned Promsvyazbank and son of former head of Russian Foreign Intelligence, the FSB.
- Denis Bortnikov, Deputy President of Russia's largest bank VTB. He is the son of Alexander Bortnikov, head of the FSB which was responsible for the poisoning of political activist Alexey Navalny in August 2020 with banned chemical agent novichok.
- Yury Slyusar, director of United Aircraft Corporation, a major aircraft manufacturer for the Russian military.
- Elena Aleksandrovna Georgieva, chair of the board of Novikombank, a state-owned defence conglomerate.
UAE v Ireland
1st ODI, UAE win by 6 wickets
2nd ODI, January 12
3rd ODI, January 14
4th ODI, January 16
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
UAE currency: the story behind the money in your pockets
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Company%20profile
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Our legal advisor
Rasmi Ragy is a senior counsel at Charles Russell Speechlys, a law firm headquartered in London with offices in Europe, the Middle East and Hong Kong.
Experience: Prosecutor in Egypt with more than 40 years experience across the GCC.
Education: Ain Shams University, Egypt, in 1978.
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MATCH INFO
Champions League last 16, first leg
Tottenham v RB Leipzig, Wednesday, midnight (UAE)
HWJN
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The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
COMPANY%20PROFILE
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
The Orwell Prize for Political Writing
Twelve books were longlisted for The Orwell Prize for Political Writing. The non-fiction works cover various themes from education, gender bias, and the environment to surveillance and political power. Some of the books that made it to the non-fiction longlist include:
- Appeasing Hitler: Chamberlain, Churchill and the Road to War by Tim Bouverie
- Some Kids I Taught and What They Taught Me by Kate Clanchy
- Invisible Women: Exposing Data Bias in a World Designed for Men by Caroline Criado Perez
- Follow Me, Akhi: The Online World of British Muslims by Hussein Kesvani
- Guest House for Young Widows: Among the Women of ISIS by Azadeh Moaveni
More on animal trafficking
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
