pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures, says the latest United Nations forecast released Wednesday.
According to the World Economic Situation and Prospects (WESP) as of mid-2022, the global economy is now projected to grow by only 3.1 per cent in 2022, down from the 4.0 per cent growth forecast released in January 2022. Global inflation is projected to increase to 6.7 per cent in 2022, twice the average of 2.9 per cent during 2010–2020, with sharp rises in food and energy prices.
The downgrades in growth prospects are broad-based, including the world’s largest economies — the United States, China and the European Union — and the majority of other developed and developing economies. The growth prospects are weakening particularly in commodity-importing developing economies, driven by higher energy and food prices. The outlook is compounded by worsening food insecurity, especially in Africa.
"The war in Ukraine – in all its dimensions – is setting in motion a crisis that is also devastating global energy markets, disrupting financial systems and exacerbating extreme vulnerabilities for the developing world," said UN Secretary-General Antonio Guterres, in a press release on Wednesday.
"We need quick and decisive action to ensure a steady flow of food and energy in
open markets, by lifting export restrictions, allocating surpluses and reserves to those who need them, and addressing food price increases to calm market volatility," he added.
Developing and Least Developed Countries’ prospectsHigh inflation is reducing the real income of households, particularly in developing countries, where poverty is more prevalent, wage growth remains constrained, and fiscal support to alleviate the impact of higher oil and food prices remains limited.
The surge in food and energy prices are having knock-on effects on the rest of the economy and are posing an additional challenge to an inclusive recovery as it disproportionally affects lowincome households that spend a much larger share of their income on food items.
The monetary tightening in the United States is also set to raise borrowing costs and worsen financing gaps in developing countries, including the least developed countries. Tighter external financial conditions will adversely affect growth prospects, especially for the countries with high exposure to global capital markets facing debt distress or risks of debt default.
"The developing countries will need to brace for the impact of the aggressive monetary tightening by the Fed and put in place appropriate macroprudential measures to stem sudden outflows and stimulate productive investments," said Hamid Rashid, Chief of the Global Economic Monitoring Branch in the UN Department of Economic and Social Affairs (DESA), and the lead author of the report.