The mid-year forecast reveal how the conflict happened the fragile economic recovery does not stop from COVID-19 pandemic, igniting a humanitarian crisis in Europe, increasing the prices of food and goods, while exacerbating inflationary pressures.
Global inflation is also expected to hit 6.7% this year, or double the 2.9% average between 2010 and 2020, with food and energy prices rising sharply.
Quick action is important: Guterres
The war in Ukraine – in every respect – is posing a crisis that is also ravaging global energy markets, disrupting financial systems and exacerbating vulnerabilities in trade for the developing world. Secretary General António Guterres.
“We need act quickly and decisively to ensure a steady flow of food and energy on open markets, by lifting export restrictions, allocating surpluses and reserves to those who need them, and addressing rising food prices to soften market volatility,” he added.
The downgrade in growth outlook includes the world’s largest economies – the United States, China and the European Union – as well as the majority of other developed and developing economies.
Higher food and energy prices are particularly affecting commodity-importing developing economies, and the outlook is increasing given the worsening of food insecurity, especially in Africa.
Energy shock in Europe
The WESP report, released by the United Nations Economic and Social Commission (DESA), examines how the spillover effects of the war in Ukraine are impacting different regions.
The Russian invasion began on 24 February, and in addition to the tragic loss of life and the ongoing humanitarian crisis – with more than six million refugees alone – it also accurately high fees to the economies of both countries.
Neighboring economies in Central Asia and Europe, including the European Union (EU), are also affected.
The increase in energy prices has come as a shock to the EU, which will import nearly 57.5% of its total energy consumption in 2020. Economic growth is forecast to increase by just 2.7%, instead of the 3.9% projected. reported in January.
Almost a quarter of Europe’s energy consumption in 2020 will come from oil and natural gas imported from Russia, and sudden stop in flow likely to lead to higher energy prices and inflationary pressures.
The report says EU member states from Eastern Europe and the Baltic region are being hit hard as they are experiencing inflation rates higher than the EU average.
Inflation disaster
In the underdeveloped and underdeveloped countries of the world (LDCs), high inflation is reducing the real income of households.
This is particularly the case in developing countries, where poverty is more prevalent and wage growth remains constrained, while financial support to cushion the impact of higher food and oil prices is limited. regime.
Rising food and energy costs are also having a direct impact on the rest of the economy presents the challenge of a comprehensive post-pandemic recovery as low-income households are disproportionately affected.
In addition, “currency tightening” by the US Federal Reserve, the country’s central bank, is also set to increase borrowing costs and exacerbate the financing gap in developing countries. developing countries, including LDCs around the world.
“Developing countries will need prepare for the impact of strong monetary tightening Hamid Rashid, Director of DESA’s Global Economic Monitoring Branch, and lead author of the report.
Climate action challenged
War is also breaking out at a time when the world record high carbon dioxide (CO2) emissions, and rising energy prices will also impact global efforts to tackle climate change. As countries seek to expand energy supplies amid high oil and gas prices, the report predicts that fossil fuel production is likely to increase in the short term.
Meanwhile, high prices of nickel and other metals could adversely affect the production of electric vehicles, while rising food prices could limit the use of biofuels.
“However, countries can also address their energy and food security concerns – which are at the forefront of the crisis – by accelerate the adoption of renewable energy and increase efficiency, thereby strengthening the fight against climate change,” said Shantanu Mukherjee, DESA’s Director of Economic Policy and Analysis.
