MN: War in Ukraine to Strike World Economy

The Russian invasion of Ukraine will affect the entire world economy, drowning activity and increasing inflation and could radically change global economic order in the long run, the International Monetary Fund (FMN) has warned..

War is causing human suffering and has sparked an unprecedented wave of refugees, while increasing food and energy prices, fuelling inflation and corroding income values, cutting off trade, supply chains and remittances to families in neighbouring Ukraine, according to the IMF.

The war is also undermining business confidence and creating uncertainty for investors, which will lower the prices of active people, tighten funding conditions and boost capital exits from developing markets, warned IMF in a report.

“The war is a major blow to the global economy, which will harm growth and increase prices”, they end up.

IMF officials have already warned that they will lower the forecast by 4.4 per cent of global economy growth this year in April, while Tuesday they have indicated they will probably lower forecasts for specific regions as well.

Countries with direct trade ties to Russia and Ukraine, tourism and financial exposure will feel increased pressure, they estimate, warning of a growing risk of unrest in some regions from sub-Saharan Africa and Latin America in Caucasus and Central Asia.

In parts of Africa and the Middle East, the problem of food supply likely deteriorates, they added, remembering that countries like Egypt import 80 percent of their wheat from Russia and Ukraine.

The IMF predicts a deep recession in Ukraine and Russia and Europe could face disruptions in natural gas imports and supply chains.

“These effects will spur inflation and slow recovery from pandemic,” estimate them.

Funding costs will increase in Eastern Europe and the region will register a large number of refugees, the IMF said, remembering that Eastern European countries, according to the United Nations, have received the majority of three million people who have fled Ukraine so far.

European countries could also face increased budgetary pressures due to higher expenditures warned of energy security and defence.

Countries in Caucasus and Central Asia, linked to Russia by trade and a joint payment system, will be hit the hardest by its recession and post-invasive sanctions through Ukraine, through limited trade, family remittances, investments and tourism.

In the Middle East and Africa, worsening external financing conditions could boost capital outflows and further drown growth in countries with high debt levels and high funding needs, the IMF said.

The highest energy and food prices, the decline of tourism and problems with access to international capital markets would threaten countries in sub-Saharan Africa, which meet 85 percent of the wheat needs through imports and a third of imports from Russia or Ukraine.

Food and energy prices, on the other hand, are the main spreading channel in the Western hemisphere, with high prices of goods likely to significantly increase already high inflation rates in Latin America, the Caribbean and the United States.

In Asia, ASEAN oil importers India and economies like some Pacific islands will have the worst consequences, while new fuel subsidies can ease the impact in Japan and Korea, the IMF said.

In the long term plan, <x0ft could radically change the global economic and geopolitical order if the energy trade changes, supply chains are reconfigured, payment networks are divided and countries begin to rethink the structure of currency reserves,” warns the IMF.