The UN’s trade and development body has downgraded its global economic growth projection for 2022 to 2.6% from 3.6% due to the Ukraine war and to changes in macroeconomic policies made by countries in recent months.
While Russia will experience a deep recession this year, significant slowdowns in growth are expected in parts of Western Europe and Central, South and South-East Asia. The ongoing war in Ukraine is likely to reinforce the monetary tightening trend in advanced countries following similar moves that began in late 2021 in several developing countries due to inflationary pressures, with expenditure cuts also anticipated in upcoming budgets. UNCTAD is worried that a combination of weakening global demand, insufficient policy coordination at the international level and elevated debt levels from the pandemic, will generate financial shock waves that can push some developing countries into a downward spiral of insolvency, recession and arrested development.The war has put further upward pressure on international prices of energy and primary commodities (Figure 4.1.), stretching household budgets and adding to production costs, while disruptions to trade and the effects of sanctions are likely to have a chilling effect on long-term investment. Coming just as pandemic-induced disruptions seemed to subside, the geopolitical crisis has dealt a blow to confidence domestically.