United Nations Conference on Trade and Development (UNCTAD) warned today that global economic growth will fall to 2.6% from 3.6% for 2022 due to the Ukraine war. In addition, it indicated that developing countries will need US$310 billion to meet their external public debt service requirements this year. These dire forecasts were contained in update of an earlier report by the UN agency on March 24.
UNCTAD sees Russia experiencing a deep recession this year, while significant slowdowns in growth are anticipated in parts of Western Europe and Central, South and South-East Asia.
« The ongoing war in Ukraine is likely to reinforce the monetary tightening trend in advanced countries following similar moves that began in late 2021 in several developing countries due to inflationary pressures, with expenditure cuts also anticipated in upcoming budgets, » said UNCTAD.
The UN’s trade and development body is concerned that a combination of weakening global demand, insufficient policy coordination at the international level and elevated debt levels from the pandemic, will generate financial shockwaves that can push some developing countries into « a downward spiral of insolvency, recession and arrested development ».
« The economic effects of the Ukraine war will compound the ongoing economic slowdown globally and weaken the recovery from the Covid-19 pandemic, » stated UNCTAD Secretary-General, Rebeca Grynspan, who added that « many developing countries have struggled to gain economic traction coming out of the Covid-19 recession and are now facing strong headwinds from the war. »
Rebeca Grynspan added: « Whether this leads to unrest or not, a profound social anxiety is already spreading. »
Even without lasting financial market disruptions, developing economies will face severe constraints on growth, commented UNCTAD, which recalled that « during the pandemic, their public and private debt stocks have increased, while issues that receded from view during the pandemic, including high corporate leverage and rising household debt in middle-income developing countries, will resurface as policy tightens.” (Image source: UK Ministry of Defence)