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Ukraine war is bad for the global economy, warns IMF

Ukraine war is bad for the global economy, warns IMF

The International Monetary Fund (IMF) observed in a blog post that the Russia-Ukraine war is fueling global uncertainty, and it may slow down economic growth in 2022. The global supply chain was already hampered by the pandemic and the war has worsened the impact.

In recent weeks, crude prices have gone above $100 a barrel and hit $140 a barrel at one point. This has pushed inflation further and put banks on a tighter monetary policy path. The global economy has been on a tricky stage for the past two years due to the Covid-19 outbreak, and major central banks are in various stages of recovery.

Russia started invading Ukraine on 24 February 2022 under the name of a 'special military operation'. The Russo-Ukrainian War has been brewing since 2014. The recent invasion has caused Europe's largest refugee crisis since World War II as over 4.8 million Ukrainians are seeking asylum.

The World Uncertainty Index's latest reading has seen a surge due to the ongoing conflict, and IMF says it is a "bad sign for growth." The index is close to what was seen in September 2001, after the terrorist attacks in the US. Similar levels were seen in 2016 when the UK voted to leave the European Union. The international monetary body also noted that the current reading of the index is still half the level at the onset of the pandemic.

IMF explained the current reading of the uncertainty index with the pandemic being a global event and coming at a time of elevated tensions related to Brexit and US-China trade tensions.

The blog post read that IMF's research has found that such a surge in the index foreshadows significant economic output decline. The IMF's analysis based on the first quarter of 2022 is pointing at a decline of up to 0.35%. The disruptions in the global supply chain can cause prices of energy and commodities to rise sharply.

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