IMF expects to cut global growth forecast due to Ukraine war

WASHINGTON

The IMF expects to cut its global growth estimate due to the economic damage caused by Russia’s invasion of Ukraine, Managing Director Kristalina Georgieva said on March 10.

“You all see the horrific toll on people, loss of lives, human suffering, massive increase in refugees. But there is also a significant economic toll,” the head of the Washington-based crisis lender told reporters.

Russia is “moving into a deep recession” with massive depreciation of the ruble and sinking purchasing power for its citizens, she said, adding that a debt default is no longer “an improbable event.”

The IMF in January cut the global growth forecast for 2022 to 4.4 percent due to the negative impacts of the Omicron variant causing COVID-19, after worldwide GDP rose by 5.9 percent last year.

The IMF is due to publish an updated World Economic Outlook next month which will include “a downward revision of our growth projections,” she said.

The war and sanctions, which include a US ban on Russian oil imports, are spilling over to the global economy, causing costs for energy and other key commodities like wheat, fertilizers and metals to surge, the IMF chief explained.

And that comes “on top of already high inflation,” which is “causing grave concern in so many places around the world,” Georgieva said.

“We got through a crisis like no other with the pandemic. We are now in an even more shocking territory. The unthinkable happened: We have a war in Europe.”

The risk of “stagflation” in which inflation soars but growth lists, eroding economic well-being, had “strongly increased” after the invasion, said Carsten Brzeski, head of macro at the bank ING.