In addition to human and economic losses, the Russia-Ukraine conflict also entails serious consequences for the global economy, creating a "painful" turning point affecting the future of the world.
 |
| The Russia-Ukraine conflict is having serious consequences for the global economy, creating a "painful" turning point that affects the future of the world. (Source: Foreign Policy) |
The conclusion was stated in a report by International Monetary Fund (IMF) Deputy Managing Director Gita Gopinath. Accordingly, the IMF official said, “The Russia-Ukraine conflict represents a turning point for the global economy. It increases the pressure for fragmentation, as well as increases defense spending, as countries collectively find themselves having to “insure” themselves by strengthening economic and national security measures.”
Such measures help countries adapt to the new realities of conflict, notes Gita Gopinath. But compared to decades of economic integration, they “may leave the global economy more vulnerable to shocks, including higher inflationary pressures, lower potential output growth, and precarious public finances.” Ukraine’s economy is among the hardest hit, she notes.
Strong support from many countries and macroeconomic policies implemented by the Kiev authorities, including actions by the National Bank of Ukraine, have partly helped this Eastern European economy avoid the deep macroeconomic instability that often accompanies conflicts of this scale and, notably, have kept inflation from soaring.
Nevertheless, the damage to the Ukrainian economy has been extensive, with output about 25% below pre-conflict levels and much of its capital reserves wiped out.
Ukraine’s economy needs continued support to recover. “The Ukraine Recovery Conference in Berlin (June 11-12) discussed ways in which the world can help, and the IMF will continue to play its role,” Gopinath noted.
Meanwhile, the Russia-Ukraine conflict also has consequences on a global scale, primarily for Europe and Ukraine's immediate neighbors in Central, Eastern and Southeastern Europe.
First, there is the problem of inflation. The military conflict is a major supply shock to these regions and other European countries that rely heavily on Russian natural gas. When Russian gas flows are cut off, energy prices skyrocket, fueling inflation and having a major impact on businesses and households.
Disruptions in Ukraine's grain exports have also contributed to food inflation and taken a heavy toll on consumers.
Second, economic growth is affected, especially in the post-Covid-19 pandemic context - when people's purchasing power decreases and inflation increases, forcing central banks to tighten monetary policy.
Third, defense spending has increased and is likely to continue to increase as countries perceive that challenges to national security are increasing.
In fact, not only are the direct costs of the Russia-Ukraine conflict enormous, but the ripple effects it is having on the geo-economic landscape and the global economy cannot be overlooked. In fact, “I think that the military campaign that Russia is waging in Ukraine has created a turning point that leads to the fragmentation of the global economy,” the IMF official said.
In an earlier report, the IMF estimated that global economic activity is still on track to grow by 3.2% this year, despite all the challenges.
However, commenting on this issue, IMF Managing Director Kristalina Georgieva noted that the global environment remains challenging and geopolitical tensions increase the risk of global economic fragmentation. According to Ms. Kristalina Georgieva, global economic activity is still very weak compared to before.
Particularly concerned about the fragmentation of the global economy, IMF spokesperson Julie Kozack noted some early signs of a “de-risking” strategy and fragmentation in the data the IMF was looking at as early as 2024. Some foreign direct investment (FDI) is increasingly flowing to countries with geopolitical ties, while trade restrictions have been on the rise over the past five years.
According to the World Trade Organization (WTO), around 3,000 trade restrictions were imposed worldwide last year - nearly three times the number imposed in 2019. If fragmentation deepens and trade restrictions increase, the world could fall into a new cold war.
According to the IMF, in assessing the economic impact of economies’ de-risking strategies, the team of the world’s leading financial institution found that some strategies have the potential to drag on growth. For example, global GDP could fall by 1.8% in certain cases, while in the case of more extreme de-risking strategies, global GDP could fall by as much as 4.5%.
Deputy CEO Gita Gopinath also warned that the damage could be up to 7% of global GDP if the world economy splits into two main blocs: the US and Europe and China and Russia.
China's two-way trade with Russia is set to hit $240 billion in 2023, setting a new record, as the two countries push for closer economic ties even as the Russia-Ukraine conflict continues, Reuters reported on January 12, citing Chinese customs data.
As Russia increasingly pays for imports in renminbi (RMB) amid Western sanctions, China has also increasingly used RMB to buy Russian goods. Customs data show that in RMB terms, two-way trade between China and Russia stood at 1.69 trillion RMB ($235.90 billion) last year, up 32.7 percent year-on-year.
Source: https://baoquocte.vn/chuyen-gia-imf-canh-bao-ve-buoc-ngoat-dau-don-doi-voi-kinh-te-toan-cau-do-xung-dot-nga-ukraine-275998.html
Comment (0)