WASHINGTON: The Inte­rnational Monetary Fund on Tuesday slashed its forecast for global economic growth by nearly a full percentage point, citing Russia’s war in Ukraine, and warning that inflation was now a “clear and present danger” for many countries.

The war is expected to further increase inflation, the IMF said in its latest World Economic Outlook, warning that a further tightening of Western sanctions on Russia to target energy exports would cause another major drop in global output.

The IMF said other risks to the outlook include a sharper-than-expected deceleration in China prompted by a flare-up of Covid-19 lockdowns.

Rising prices for food, energy and other goods could trigger social unrest, particularly in vulnerable developing countries, the IMF said.

Downgrading its forecasts for the second time this year, the the global crisis lender said it now projects global growth of 3.6pc in both 2022 and 2023, a drop of 0.8 and 0.2 percentage point, respectively, from its January forecast due to the war’s direct impacts on Russia and Ukraine and global spillovers.

Medium-term global growth is expected to decline to about 3.3pc over the medium-term, compared to an average of 4.1pc in the period from 2004 to 2013, and growth of 6.1pc in 2021.

“What has Russia’s invasion of Ukraine cost? A crisis on top of a crisis, with devastating human costs and a massive setback for the global economy,” IMF Managing Director Kristalina told a food security panel on Tuesday.

The IMF has estimated that Ukraine’s GDP will collapse by 35pc this year, while Russia’s output will shrink by 8.5pc in 2022, while emerging and developing Europe, including both countries, will contract by 2.9pc.

But IMF Chief economist Pierre-Olivier Gourinchas told a news briefing that a tightening of sanctions against Russia to include restrictions on energy exports could double Russia’s GDP decline to 17pc by 2023.

The European Union, highly dependent on Russian energy, saw its 2022 growth forecast cut by 1.1 percentage points, while Britain now faces slower economic growth and more persistent inflation than any other major economy next year.

Spillovers from higher energy prices, a loss of confidence and financial market turmoil from this step would cut another two percentage points off of global growth forecasts, Gourinchas said.

The war, which Russia describes as a “special military operation” has caused a humanitarian crisis in Eastern Europe, displacing some 5 million Ukrainians to neighboring countries, the IMF said.

Published in Dawn, April 20th, 2022