The world economy may be on the verge of a new crisis, while it is still recovering from the pandemic, the United Nations Organization (UN) stressed.
The war in Ukraine has upended a fragile recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, driving up food and commodity prices and exacerbating inflationary pressures around the world.
At the same time, geopolitical and economic uncertainties are dampening business confidence and investment and further weakening the near-term economic outlook.
In this context, the UN projects that the world economy will grow only 3.1% in 2022 and 2023, which marks substantial downward revisions of 0.9 and 0.4 percentage points, respectively, from its previous forecast published in January 2022.
The baseline outlook faces significant downside risks from a further escalation of the war in Ukraine, further waves of the pandemic, and faster-than-expected monetary tightening in developed economies.
The downgrades in growth prospects are broad-based. The US economy is forecast to slow to 2.6% in 2022 due to high inflation pressures, aggressive Federal Reserve monetary tightening and a strong US dollar, which will worsen net export balances.
Meanwhile, in China, GDP is forecast to grow 4.5%, a downward revision of 0.7 percentage points, with strict zero Covid-19 policies negatively affecting growth prospects.
For its part, the economy of the European Union has an exceptionally high cost: its GDP is expected to grow 2.7% in 2022, 1.2 percentage points less than expected in January.
The economic prospects for the Commonwealth of Independent States and Georgia are also drastically deteriorating.
The UN projects that the economy of the Russian Federation will contract around 10% in 2022, hit by unprecedented trade and financial sanctions that came into effect in March.
Amid massive infrastructure destruction, population displacement and disruption of economic activities, Ukraine’s economy is projected to contract by 30-50% in 2022.
The outlook for developing countries has deteriorated, with GDP estimated to grow 4.1% in 2022, this is 0.4 percentage point less than the January forecast.
Higher energy and food prices, rising inflationary pressures, and slowing growth in the United States, the European Union, and China are weakening growth prospects in developing countries.