UN lowers global economic growth forecast following shocks from Russian-Ukrainian war

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The UN has lowered its global economic growth forecast for 2022 to 2.5% from 3.5% as the Russian-Ukrainian war worsens growth prospects, weakens the rebound from the Covid-19 pandemic and deepens a recovery uneven.

Russia will fall into a deep recession this year, while major slowdowns in growth are expected in parts of Western Europe and Central, South and Southeast Asia, the United Nations Conference said on Thursday. on Trade and Development (UNCTAD) in a report.

Longstanding structural problems, new geopolitical risks and tighter monetary policies are expected to hamper growth in developing economies, he said. This will not only hurt their fragile recovery, but also undermine their long-term development, he added.

“The economic effects of the war in Ukraine will aggravate the ongoing global economic downturn and weaken the recovery from the Covid-19 pandemic,” said Rebeca Grynspan, UNCTAD Secretary-General.

“Many developing countries have struggled to gain economic ground after the Covid-19 recession and are now facing strong headwinds of war. Whether this leads to unrest or not, deep social anxiety is already spreading.

The Russian military offensive in Ukraine, which is entering its second month, has led to higher oil prices, which has aggravated inflationary pressures on the global economy and raised the price of food and raw materials. The International Monetary Fund and other organizations have said the conflict will stunt global growth this year, increase poverty and disrupt supply chains.

Soaring food and fuel prices will have an immediate effect on the most vulnerable in developing countries, leading to hunger and hardship for households that spend most of their income on food, UNCTAD says .

“The danger for many developing countries that rely heavily on imported food and fuel runs deeper as rising prices threaten livelihoods, discourage investment and raise the specter of widening trade deficits” .

The war in Ukraine also caused immediate disruptions to world trade and is likely to have longer-term effects on its structure, UNCTAD said.

In the short term, the higher prices and the scarcity of supply affect economies more dependent on Ukrainian and Russian exports, especially of basic products, including oil, minerals and foodstuffs.

The UN body expressed concern about uncertainties stemming from the conflict in major international markets: a volatile capital flow environment, exchange rate instability and rising borrowing costs, in particular for least developed countries and middle-income developing countries, with the risk of serious external debt payment difficulties.

To protect the global economy, UNCTAD has made several policy recommendations, including greater and less conditional financial support to developing countries to help them cope with financial and economic shocks and increase investment to boost economic growth. .

There is also a need to immediately relieve Ukraine’s debt and reinvigorate discussions on ways to restructure the developing country’s sovereign debt during times of severe financial stress.

He also called for sectoral policies, including price controls and subsidies, to tackle inflationary pressures.

“The global economy is staring, literally and metaphorically, at the barrel of a gun. Stopping the war in Ukraine, rebuilding its economy and achieving a lasting peace settlement must be priorities,” the report said.

“But the international community will also have to deal with the widespread economic damage that the conflict is already causing in many parts of the developing world; damage that will only intensify with the persistence of the conflict.

Updated: March 24, 2022, 2:49 p.m.

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