The International Monetary Fund (IMF) has slashed its forecast for world economic growth this year to 3.6 percent, citing a disruption of global commerce caused by Russia's war in Ukraine.
The IMF revised its global growth projection downward by nearly a full percentage point from its January projection in its latest World Economic Outlook released on April 19.
The IMF said the war was the main reason for the downward revision, and its fallout will be felt most acutely in Ukraine, Russia, and the poorest nations in the world.
"The economic effects of the war are spreading far and wide -- like seismic waves that emanate from the epicenter of an earthquake," IMF chief economist Pierre-Olivier Gourinchas said in the report.
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Global economic prospects “have been severely set back, largely because of Russia's invasion of Ukraine,” Gourinchas said.
He cautioned that the outlook is highly uncertain, and things could get drastically worse if the war is prolonged and tougher sanctions are imposed on Moscow.
The 3.6 percent growth forecast represents a steep decline from the 6.1 percent growth in the world economy recorded last year as it rebounded from the economic slump caused by the coronavirus pandemic.
But the war has caused an increase in oil prices, exacerbated inflation, prompted drastic sanctions on Russia, and sparked a flood of refugees into neighboring countries, the IMF said.
The report projects that the economies of Russia and Ukraine will experience steep contractions. Russia’s is expected to shrink 8.5 percent this year and Ukraine’s 35 percent, it said.
The 19 countries in the euro zone will grow but by just 2.8 percent in 2022, down sharply from the 3.9 percent forecast by the IMF in January and down from 5.3 percent growth last year.
U.S. economic growth is expected to drop to 3.7 percent this year from 5.7 percent in 2021.
The IMF expects the growth of the Chinese economy to decelerate to 4.4 percent this year from 8.1 percent in 2021. The latest lockdowns in China to control the spread of the coronavirus are likely to cause new bottlenecks in global supply chains, the IMF said.
The IMF also sharply downgraded its growth estimate for Britain to 3.7 percent this year, down a full percentage point from an estimate of 4.7 percent in January.
The World Economic Outlook also mentions reduced supplies of oil, gas, and metals produced by Russia, and wheat and corn produced by both Russia and Ukraine.
The result has driven up prices sharply in Europe, the Caucasus, Central Asia, the Middle East, North Africa, and sub-Saharan Africa, and hurt lower-income households around the world.
The IMF forecasts a 5.7 percent jump in consumer prices in the world’s advanced economies this year and 8.7 percent in developing nations.
The price pressures have prompted central banks in many countries to raise interest rates, but that will hurt highly indebted developing nations, especially if the U.S. Federal Reserve and others move more aggressively on interest rates, the report noted.
"Even prior to the war, inflation had surged in many economies because of soaring commodity prices and pandemic-induced supply-demand imbalances," Gourinchas said.
Now, shortages caused by the war "will greatly amplify those pressures, notably through increases in the price of energy, metals, and food," he said.
The crisis will be the focus of finance officials from around the world who are gathering in Washington this week -- virtually and in person -- for the spring meetings of the IMF and World Bank.