Written by 6:02 am Europe Economy

Ukraine war pulls rug out from under world economy rebound

PARIS (AFP) – This year was supposed to confirm the world economy’s comeback from the Covid-19 pandemic crisis. Instead, the six-month-old war in Ukraine has sparked fears of recession.

“Six short months ago, the macro landscape was markedly different from today,” the financial data firm S&P Global said in a recent report.

Both the United States and euro zone economies were expected to see strong growth, and elevated inflation levels were seen by policymakers and markets as transitory.

“Things have changed, and not for the better,” added S&P Global.

Global growth forecasts have been repeatedly cut, with the International Monetary Fund now expecting a 3.2 per cent expansion compared to nearly 5 per cent earlier.

Russia and Ukraine together account for just 2 per cent of global output and trade, according to the OECD. But Russia is a major exporter of oil, gas and agricultural goods, while many developing countries rely heavily on grain from Ukraine, one of the breadbaskets of the world.

The war has disrupted those shipments, causing energy and food prices to surge worldwide.

Inflation has soared everywhere, prompting central banks to aggressively hike rates – a move that usually tames prices but slows economic activity.

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