IMF: Invasion of Ukraine will ‘severely set back’ world’s economy

The International Monetary Fund (IMF) is warning that Russia’s invasion of Ukraine will “severely set back” the world’s economy.

In its World Economic Outlook released on Tuesday, an IMF official said the conflict between Russia and Ukraine will slow global economic growth and drive up inflation.

“Beyond the immediate humanitarian impacts, the war will severely set back the global recovery, slowing growth and increasing inflation even further,” IMF Economic Counsellor and Director of Research Pierre-Oliver Gourinchas wrote in the report’s foreword.

Gourinchas said the IMF has lowered its global growth projections from its January forecasts. The financial institution now projects global growth to be 3.6 percent in 2022 and 2023, which is 0.8 and 0.2 percentage points lower than the January outlook.

“The economic effects of the war are spreading far and wide—like seismic waves that emanate from the epicenter of an earthquake—mainly through commodity markets, trade, and financial linkages,” Gourinchas wrote.

The revised projections from the IMF come in the seventh week of Russia’s invasion of Ukraine, which began on Feb. 24. The U.S. and other allied countries responded to the offensive by levying sweeping sanctions on Russia, which hit the country’s economy hard.

The World Bank revealed on Monday that the international financial institution was lowering its growth forecast for this year because of Russia’s invasion of Ukraine. The outlook decreased from 4.1 percent to 3.2 percent.

Ukraine has said that it is running a $5 billion monthly deficit amid the war, while the World Bank estimated that its economy with contract by some 45 percent this year.

Ukrainian President Volodymyr Zelensky spoke with IMF Managing Director Kristalina Georgieva on Sunday to discuss post-war plans to rebuild Ukraine and maintain financial stability.

Gourinchas wrote on the IMF Blog that “The most immediate priority is to end the war,” noting that the economic recovery from the pandemic was potentially erased by the conflict.

“In the matter of a few weeks, the world has yet again experienced a major shock. Just as a durable recovery from the pandemic was in sight, war broke out, potentially erasing recent gains,” the official wrote.

“The many challenges we face call for commensurate and concerted policy actions at the national and multilateral levels to prevent even worse outcomes and improve economic prospects for all,” he added.