Conflict may alter global economy, IMF says

WASHINGTON－The ongoing Ukraine conflict will affect the entire global economy by slowing growth and jacking up inflation, and could fundamentally reshape the global economic order in the longer term, said the International Monetary Fund on Tuesday.

Beyond the human suffering and historic refugee flows, the conflict is boosting prices for food and energy, fueling inflation and eroding the value of incomes, while disrupting trade, supply chains and remittances in countries neighboring Ukraine, stated the IMF on its website.

It is also eroding business confidence and triggering uncertainty among investors that will depress asset prices, tighten financial conditions and could trigger capital outflows from emerging markets.

"The conflict is a major blow to the global economy that will hurt growth and raise prices," the IMF said.

IMF officials have already said they expect to lower the fund's previous forecast of 4.4 percent for global economic growth this year. In its statement posted on its website on Tuesday, they suggested that regional growth forecasts would also be likely revised downward.

The IMF is due to release updated forecasts on April 19.

Countries with direct trade, tourism and financial exposures would feel mounting pressure, said the IMF citing a greater risk of unrest in some regions from sub-Saharan Africa to Latin America, the Caucasus and Central Asia.

At the same time, food insecurity was likely to further increase in parts of Africa and the Middle East, where countries like Egypt import 80 percent of their wheat from Russia and Ukraine.

In the longer term, the IMF said the conflict "may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings".

The IMF predicted deep recessions in Ukraine and Russia, and said Europe could see disruptions in natural gas imports and wider supply chain disruptions. Eastern Europe, which has absorbed most of the more than 3 million people who have fled Ukraine, would see higher financing costs as a result.

It also said countries in the Caucasus and Central Asia with close trade and payment system links to Russia would be more affected by its recession and sanction effects since the conflict began, curbing trade, remittances, investment and tourism.

In the Middle East and Africa, worsening external financing conditions may spur capital outflows.

Agencies via Xinhua