Just as world economic experts thought the threat of the omicron variant of COVID-19 would give way to sustained economic recovery, yet another unprecedented global crisis—the war in Ukraine—began.
That’s according to the latest World Economic Outlook report from the International Monetary Fund, released Tuesday, April 19. The latest report from the IMF predicts the world economy will grow by 3.6% in 2022, 0.8 points worse than previously predicted in January and significantly slower than 2021’s estimated economic growth of 6.1%. The IMF additionally predicted that the rate of growth in 2023 would remain flat at 3.6%, 0.2 points worse than previously anticipated.
In a foreword to the report, Pierre-Olivier Gourinchas, Director of Research at the IMF, explained that world economic conditions have deteriorated since January, mainly due to Russia’s actions in Ukraine, new coronavirus-related lockdowns in China and inflation.
“Beyond the immediate humanitarian impacts, the war will severely set back the global economy, slowing growth and increasing inflation even further,” wrote Gourinchas. The invasion is predicted to constrict Russia’s GDP by 8.5% in 2022 and crush Ukraine’s by at least 35% this year.
“Even if the war were to end soon, the loss of life, destruction of physical capital, and flight of citizens will severely impede economic activity for many years to come,” the report notes.
Additionally, sanctions imposed on Russia by other countries bring with them their own direct and indirect financial consequences.
Outside Ukraine, advanced economies are expected to fare worse than developing ones—the IMF expects advanced economies to grow at an average rate of 3.3% in 2023 and 2.4% the year after as developing market economies grow at 3.8% and 4.4% in the same period.
U.S. GDP growth is expected to perform close to the average for other advanced economies, and notably worse than China’s. U.S. GDP is expected to grow by 3.7% in 2022 and then slow to 2.3% growth in 2023, while China’s GDP growth for those years is predicted to be 4.4% and 5.1%, respectively.
But in the report’s foreword, Gourinchas notes that the latest lockdowns in China indicate that that growth is not guaranteed: “With continued tight policies toward the real estate sector and the possibility of more widespread lockdowns as part of the strict zero-COVID strategy, China’s economy could slow more than currently projected—with consequences for Asia and beyond,” including in developing economies.
