UK Growth To By Slowest Among G7 Countries Due To Ukraine War

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The economy of the United Kingdom is expected to increase by 3.7 per cent this year, down from 4.7 per cent forecasted in January.

However, the UK is anticipated to expand at the slowest rate in the G7 and throughout Europe’s major economies next year, at just 1.2 per cent, down from the earlier forecast of 2.3 per cent.

Apart from heavily sanctioned Russia, the UK forecast for 2023 is the slowest in the wider G20 grouping, which includes countries like China and India.

The IMF collaborates with its 189 member countries to try to stabilise the global economy, which includes providing short-term loans and support to failing countries.

In many nations, it claimed, inflation has become a “clear and present danger,” and the situation has exacerbated supply pressures from the coronavirus pandemic.

“In the matter of a few weeks, the world has yet again experienced a major, transformative shock,” IMF director of research Pierre-Olivier Gourinchas wrote in the organisation’s 2022 World Economic Outlook.

“Just as a durable recovery from the pandemic-induced global economic collapse appeared in sight, the war has created the very real prospect that a large part of the recent gains will be erased.”

The organisation predicted only 3.6 percent worldwide growth this year, down almost a percentage point from its prediction prior to the war.

In addition, the World Bank lowered its growth prediction from 4.1 percent to 3.2 per cent.

The conflict has already wreaked havoc on Ukraine’s and Russia’s economies, which were shut off from crucial trade and financial networks after the invasion by sanctions imposed by the West.

According to the IMF, Ukraine’s economy is predicted to fall by 35 per cent or more this year, while Russia’s is expected to shrink by 8.5 per cent.

The IMF warned that because Russia is a significant energy producer and a vital supplier of essentials like wheat and corn alongside Ukraine, the implications will be felt well beyond their borders.

In a short period of time, the world economy has been hit by two major shocks: the epidemic and the war in Ukraine.

The latter is compounding the problems caused by the former, stalling what had been a solid rebound and driving prices even higher.

Before one of the world’s largest energy suppliers invaded one of the world’s largest food exporters, supply bottlenecks had already pushed up food and energy costs.

However, the strict Covid lockdowns in some parts of China have created new obstacles.

In impoverished countries that rely on food imports, rising prices threaten societal stability.

Concerns about inflation becoming entrenched have prompted central bankers throughout the world to hike interest rates.

As a result, borrowing costs are rising to cover the huge debts many countries piled up during the pandemic.

All of this necessitates considerable expertise and coordination among the world’s old and new financial powerhouses. However, that has become a scarce commodity in recent years.

“The economic effects of the war are spreading far and wide – like seismic waves that emanate from the epicenter of an earthquake,” it said.

The war is expected to reduce growth by 1.7 percentage points in Germany, where the economy is highly intertwined, according to the report.

Households will feel the effects of the war even if they have little direct trade with Russia and Ukraine, since central banks respond to higher inflation by boosting interest rates, making borrowing more expensive, according to the IMF.

For example, in the United States, the organisation cut its growth prediction for 2022 by 0.3 percentage points to 3.7 per cent, noting the possibility of more aggressive interest rate hikes.

Inflationary pressures are much higher now than they were in January, when the IMF issued its latest prediction.

Inflation in “established economies” is now expected to touch 5.7 per cent this year, while it is expected to exceed 8.7 per cent in developing markets.

Inflation in the UK is forecast to be 5.3 per cent next year, the most in the G7 and higher than all EU nations, with only crisis-ridden Argentina, Turkey, and Russia exceeding it in the G20.

“Inflation has become a clear and present danger for many countries,” Gourinchas wrote in a blog.

A few countries, such as oil exporters, are gaining an advantage. Saudi Arabia, for example, is expected to grow faster than it did in January, according to the IMF.

The hazards, however, are not solely economic, according to the IMF.

It added that the war had exacerbated political tensions and caused a “more permanent fragmentation of the world economy into geopolitical blocks with distinct technology standards, cross-border payment systems, and reserve currencies,” risking a “more permanent fragmentation of the world economy into geopolitical blocks with distinct technology standards, cross-border payment systems, and reserve currencies.”

“Such a ‘tectonic shift’ would cause long-run efficiency losses, increase volatility and represent a major challenge to the rules-based framework that has governed international and economic relations for the last 75 years,” the IMF said.

The IMF estimates, according to a Treasury official, “will be troubling for many people and families” in the UK.

“However the support we provided over the past two years has put our economy in a good position to deal with these headwinds, including through record numbers of employees on payrolls and a strong economic recovery from the pandemic,” the spokesperson said.

(Adapted from

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability

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