A Russian invasion of Ukraine could lead to a catastrophic 1 percent decline in projected global economic growth in 2022, according to the United Nations Conference on Trade and Development (UNCTAD) Global Economy Report released March 24.
"The report's main takeaway is a downgrade in the global growth outlook for this year," said Richard Kozul-Wright, Director of UNCTAD's Division of Globalization and Development Strategies, speaking in Geneva. “Back in September last year, it was assumed that the growth of the world economy would be 3.6 percent. Now a growth of 2.6 percent is expected, and the main reason for this is the war in Ukraine.”
Inflation is rising, and developing countries are already saddled with a debt burden of one trillion US dollars. In this situation, UNCTAD recognized that the financial measures already taken to support developing countries faced with unstable exchange rates, rising interest rates and soaring food and fuel prices were insufficient.
Comprehensive multilateral fiscal reform - perhaps comparable in scope and ambition to the US Marshall Plan that propelled Western Europe after World War II - is urgently needed to improve the financial liquidity of developing countries, UNCTAD said. This will help prevent the possible bankruptcy of both developing and middle-income countries.
“The outlook for the global economy is rapidly deteriorating, and to think that this year, after two years of the COVID-19 crisis, the average growth rate of the global economy will be 2.6 percent, compared to 5.5 percent last year,” said UNCTAD Secretary-General Rebeca Greenspan.
Greenspan urged the IMF and the World Bank to take emergency action: use the rapid financing tools that the IMF provides to help countries with balance of payments problems.
“Conditions are getting worse for everyone,” the head of UNCTAD continued, noting that the climate crisis has played a negative role, as have a series of droughts in the Horn of Africa, the ongoing COVID-19 pandemic and the war in Ukraine.
Even relatively wealthy countries, facing rising costs of living, turn to the international financial system for help to stay afloat. But the poorest, import-dependent countries will suffer much more as a result of the global economic downturn.
"The main burden will fall on developing countries due to the sharp rise in food, energy and fertilizer prices, as well as the financial crisis," said Greenspan.
