War In Ukraine Is The 'Single Most Important Negative Factor' For Global Economy: IMF Chief

The IMF previously issued warnings on the fragmentation of the global economy as a result of the Russia-Ukraine war, and cut 2023 growth forecasts to 2.7 per cent — predicting a slump

Kristalina Georgieva, IMF chief.

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International Monetary Fund’s (IMF’s) Chief Kristalina Georgieva has said that the conflict in Ukraine is the “single most important negative factor” for the world economy this year, and most likely for 2023 as well.

Georgieva, who was speaking to CNBC on Wednesday, shared her views on the current global economic scenario on the sidelines of the Group of 20 meeting in Bali, Indonesia.

“We judge the war in Ukraine to be the single most important negative factor for the world economy this year, most likely also next year. Anything that creates more anxiety is, of course, damaging for the prospects for growth and for meeting the needs and aspirations of people everywhere,” said the managing director of the IMF.

Georgieva comments were in response to a missile that struck Polish territory on late Tuesday, which killed two civilians.

According to CNBC, preliminary assessments suggest the Russian-made missile may have been fired by Ukrainian forces at an incoming Russian missile.

NATO’s Secretary-General Jens Stoltenberg said “there was no indication this was the result of a deliberate attack,” even as investigations are ongoing. “But let me be clear, this is not Ukraine’s fault. Russia bears ultimate responsibility as it continues its illegal war against Ukraine,” Stoltenberg added.

Most G-20 members condemned Russia’s aggression against Ukraine in a draft declaration on Tuesday.

The IMF chief said, “I want to congratulate Indonesia for chairing so well, in this very difficult moment.” However, she stressed that the G-20 summit is not about the fact that there’s a joint declaration, but the focus has been "very pressing problems" — such as global inflation, rising costs of living, food and energy security.

“I was listening very carefully to all the statements and it’s encouraging that these are the issues we are focusing on — as we must.”

The IMF previously issued warnings on the fragmentation of the global economy as a result of the Russia-Ukraine war, and cut 2023 growth forecasts to 2.7 per cent — predicting a slowdown from an expected 3.2 per cent in 2022.

“This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the Covid-19 pandemic,” the international body mentioned in its October report. "We are seeing some signs of fragmentation already and they come from a legitimate concern… the security of supplies,” Georgieva said.

“We have seen [this] because of Covid and because of the war in Ukraine, that supply chains get interrupted, and that damages growth domestically and internationally.”

She added that if the world chooses to go into “separate blocs,” there will be a high price to pay.  “And this price would be particularly high for open economies, and more broadly for the developing world,” she warned.

Asia and the Pacific, for example, could lose over 3 per cent in gross domestic product if trade is cut off in sectors hit by US chip sanctions on China and if non-tariff barriers in other areas are raised to “Cold War-era levels,” said the IMF in a report last month.

“If we want not to lose somewhere between $1.4 [trillion] to maybe $3.4 trillion a year — just imagine what we can do with this money — then we should very carefully project the consequences of actions and be wise to prevent sleepwalking into a world that is poorer and less secure,” Georgieva added.