IMF cuts global growth forecast for 2022 to 3.6% from 4.4% given Russo-Ukraine war, warns of inflation risks

In its latest quarterly World Economic Outlook released on Tuesday, the International Monetary Fund (IMF) cut its forecasts for global growth in 2022 and 2023 by 0.8% and 0.2% respectively to 3.6%, reported Reuters. 

Key takeaways as summarised by Reuters:

• The IMF warned that rising food and fuel prices could "significantly increase" the risk of social unrest in emerging markets/developing economies. 
• The IMF said its downgrade reflected the Russo-Ukraine war's direct impact on Russia and Ukraine, as well as global spillovers, and the institution now sees inflation remaining elevated "for much longer". 
• Global growth is seen declining to about 3.3% over the medium term. 
• The IMF said war-related supply shortages will amplify existing inflationary pressures, raising the price of food, energy and metals. Shortages are seen lasting into 2023. 
• The war in Ukraine is adding to supply shocks seen during the Covid-19 pandemic and will trigger more shortages beyond the energy and agricultural sectors. 
• The IMF said inflation is projected at 5.7% in advanced economies in 2022, 1.8% higher than in its January forecast, though is seen declining to 2.5% in 2023. 
• The IMF said its growth and inflation forecasts are marked by "high uncertainty" and worsening supply-demand imbalances could lead to persistently higher inflation, as well as slower growth. 
• The IMF sees inflation at 8.7% in emerging markets/developing countries, 2.8% higher than in its January forecast, and then declining to 6.5% in 2023. 
• The IMF lowered its US GDP growth forecast to 3.7% in 2022 and to 2.3% in 2023, a downgrade of 0.3% for both years from its January forecast. 
• The IMF sees a rising risk that inflation expectations become de-anchored, which is prompting more aggressive tightening by central banks. 
• The IMF said that the latest covid lockdowns in China could cause new bottlenecks in global supply chains. 
• The IMF lowered its Euro area growth forecast to 2.8% in 2022 and 2.3% in 2023, down from 3.9% and 2.5% respectively in its January forecast. 
• The IMF sees a contraction of 2.9% in emerging and developing Europe in 2022, a drop of 6.4% from its January forecast. Growth is then seen at 1.3% in 2023, versus the previous forecast of 2.9% growth. 
• The IMF sees GDP growth in China of 4.4% in 2022 and 5.1% in 2023, down 0.4% and 0.1% from the January forecast. 
• The IMF sees the Russian economy contracting by 8.5% in 2022 and by 2.3% in 2023. 
• The IMF said that divergence between advanced and emerging market economies is expected to persist, suggesting some 'permanent scarring' from the pandemic. 
• The IMF said the medium-term outlook had been revised downwards for all groups except commodity exporters who will likely benefit from the surge in energy and food prices. 
• The IMF sees world trade in goods and services expanding by 5% in 2022 and 4.4% in 2023, down 1% and 0.5% from the January forecast.