Stopping war in Ukraine is the only effective measure for global economy – IMF

The International Monetary Fund (IMF) has stressed the increasing risks for the world economy and considers stopping the Russian war against Ukraine the only effective measure to improve the global outlook.

Source: updated October macroeconomic forecast entitled World Economic Outlook: Navigating Global Divergences, published on 10 October

Directors of the IMF agreed that stopping Russia’s war against Ukraine remains the only effective measure to improve the global outlook, IMF stresses.

The IMF has maintained its global economic growth forecast for 2023 at 3%. However, the index for 2024 was decreased by 0.1 percentage point to 2.9 %.

The IMF believes that the current division of world economy into blocs amid the Russian war in Ukraine and other geopolitical contradictions may increase:

• due to the implementation of additional trade restrictions (specifically on trade in strategic goods, such as critically important fossil fuels);
• in the area of cross-border movement of capital, technologies and labour; 
• in the area of international payments.

 "Should this happen, the costs for global prosperity will be high," the IMF stressed.

The IMF described a theoretical scenario which provides for creating two possible blocs – US-Europe+ (which would advocate the withdrawal of Russian troops from Ukraine) and the China-Russia+ bloc.

Escalation of the war in Ukraine may also cause an increase in food prices that have remained high even without the war. This will create serious hardships for many low-income countries.

"This, of course, represents a serious risk to the disinflation strategy," the IMF states.

The suspension of the Black Sea Grain Initiative in July and recent Russian attacks on Ukrainian grain facilities also cause concern in this context.

Background:

• The IMF has included Ukraine in its updated macroeconomic forecast. The fund expects GDP to grow by 2% in 2023 and accelerate to 3.2% in 2024 after a 29.1% drop last year. The Extended Fund Facility (EFF) provides for this.
• The IMF predicts the economy will grow by 2.2% in 2023 in Russia and slow down to 1.1% in 2024.

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