The Ukraine will be hit hardest, with economic output likely to fall by 35 percent, according to the IMF outlook for Europe on Friday. Russia, which faces heavy sanctions after invading Ukraine, is likely to fall 8.5 percent.
According to the IMF, many important economic nations such as Germany, France, Italy and Great Britain will shrink for two quarters in a row this year or at least largely stagnate. Two negative quarters in a row are considered a recession.
Overall, the IMF has reduced its growth estimates for the established economic powers by one point to three percent. The European emerging countries – albeit without Russia and Ukraine – are only likely to grow by 2.7 percent this year. The most recent estimate from January was thus lowered by 1.5 points.
Inflation is becoming a bigger problem than expected
Inflation, on the other hand, is becoming much more of a problem than previously thought. Here, the IMF expects 5.5 percent in the large countries and even 9.3 percent in the emerging countries. The previous estimates were thus raised by 2.2 and 3.5 percentage points, respectively. “We are at the beginning of a new era of high inflation,” France’s finance minister told TV broadcaster BFM on Friday. According to the IMF, monetary policy may have to take more decisive action if the risks are confirmed.
Meanwhile, Ukrainian Finance Minister Serhiy Marchenko warned of a collapse of the economy in Ukraine in view of the war. “Spiegel” quoted the minister on Friday as saying that three-quarters of his country’s gross domestic product had already been lost since the fighting began.
According to Marchenko, 64 percent of workers in Ukraine were recently no longer able to do their actual work. The income of the Ukrainian state has fallen sharply and the gap is widening with every day of war, the news magazine continued, quoting the minister.
Source: Nachrichten
