May 18, 2022

IMF Cuts GDP Growth Forecasts amid Fallout from War in Ukraine

The International Monetary Fund (IMF) has downgraded its global growth forecasts including its projections for emerging market and developing economies in Asia.
In its annual World Economic Outlook released in Washington Tuesday, the IMF said global growth was now forecast at 3.6 percent for this year — down from 6.1 percent last year and also down 0.8 percentage points from its January projection.
“The ongoing war in Ukraine and sanctions on Russia are expected to reduce global growth in 2022 through direct impacts on the two countries and global spillovers,” the outlook said.
“This shock comes just as the threat from the Omicron variant appeared to be fading, with many parts of (the) world moving past the acute phase of the pandemic.”
For 2022, growth is expected to stagnate at the same level of 3.6 percent, down 0.2 points from the January forecast.
In emerging and developing Asia, growth is forecast at 5.4 percent for this year, down 0.5 points from the January projection, rising to 5.6 percent next year, down 0.2 points.
The five main emerging and developing ASEAN economies — Indonesia, Malaysia, the Philippines, Thailand and Vietnam — are forecast to expand 5.3 percent this year, down 0.3 points from the earlier projection.
In 2023, growth in these economies is expected to accelerate to 5.9 percent, 0.1 point lower than forecast in January.
Among individual Southeast Asian economies, the outlook said that Cambodia was forecast to expand by 5.1 percent this year and 5.9 percent next year.
The fastest growing ASEAN economy this year is expected to be the Philippines with 6.5 percent growth followed by Vietnam (6.0 percent), Brunei (5.8 percent), Malaysia (5.6 percent), and Indonesia (5.4 percent).
Among the other ASEAN economies, slower growth is forecast for Singapore (4.0 percent), Thailand (3.3 percent), Laos (3.2 percent) and Myanmar (1.6 percent).
Elsewhere in Asia, China is forecast to expand 4.4 percent this year, down 0.4 points from the IMF projection in January. Japan is expected to grow 2.4 percent, down 0.9 percent from the earlier forecast.
The outlook warned that soaring food and fuel prices would be felt worldwide.
“The economic effects of the war are spreading far and wide —like seismic waves that emanate from the epicenter of an earthquake — mainly through commodity markets trade and financial linkages,” it said.
“Because Russia is a major supplier of oil, gas, and metals, and, together with Ukraine, of wheat and corn, the current and anticipated decline in the supply of these commodities has already driven their prices up sharply.”
The most affected regions so far have been Europe, the Caucasus, Central Asia, the Middle East and North Africa, and sub-Saharan Africa.
But “the food and fuel price increases will hurt lower-income households globally — including in the Americas and Asia,” the IMF said.
In his foreword to the outlook, the IMF’s new Economic Counsellor Pierre-Olivier Gourinchas warned of a “more permanent fragmentation of the world economy into geopolitical blocks with distinct technology standards, cross-border payment systems, and reserve currencies.
“Such a tectonic shift would entail high adjustment costs and long-run efficiency losses as supply chains and production networks are reconfigured,” Gourinchas said.
“It also represents a major challenge to the rules-based framework that has governed international and economic relations for the last 70 years.”
Gourinchas also warned that uncertainty around the projections was “considerable, well-beyond the usual range.
“Growth could slow down further while inflation could exceed our projections if, for instance, sanctions extend to Russian energy exports,” Gourinchas said.
At the same time, “continued spread of the virus could give rise to more lethal variants that escape vaccines, prompting new lockdowns and production disruptions.”

Source: Agency Kampuchea Press

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