Global economic prospects have been set back recently, largely due to the Russia-Ukraine conflict. This conflict has unfolded before the global economy has had a chance to fully recover from the COVID-19 pandemic. The International Monetary Fund (IMF) projects that global growth will slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023.
Russia is a major supplier of oil, gas, and metals, and together with Ukraine, of wheat and corn. Reduced supplies of these commodities will drive up their prices. Even before the war, inflation had been rising in many countries due to supply-demand imbalances and policy support during the pandemic. The IMF projected inflation in 2022 will reach 5.7% in advanced economies, compared with 3.9% projected in January this year.
A more aggressive monetary tightening response due to rising inflation, and fiscal policy being constrained due to the recent spending on COVID-19, means that policymakers are now limited in their capacity to stimulate growth.
Despite this somewhat dim economic outlook, commodity exporting countries may benefit from the surge in energy and food prices. More... Source: IMF | Photo: Rinson Chory / Unsplash