Our institutions are committed to shared peace and prosperity—especially vital goals at this crucial moment for the world we live in.
To put it simply: we are facing a crisis on top of a crisis.
First, the pandemic: it turned our lives and economies upside down—and it is not over. The continued spread of the virus could give rise to even more contagious or worse, more lethal variants, prompting further disruptions—and further divergence between rich and poor countries.
Second, the war: Russia’s invasion of Ukraine, devastating for the Ukrainian economy, is sending shockwaves throughout the globe.
Above all is the human tragedy—the suffering of ordinary men, women, and children in Ukraine, among them over 11 million displaced people. Our hearts go out to them.
The economic consequences from the war spread fast and far, to neighbors and beyond, hitting hardest the world’s most vulnerable people. Hundreds of millions of families were already struggling with lower incomes and higher energy and food prices. The war has made this much worse, and threatens to further increase inequality.
And for the first time in many years, inflation has become a clear and present danger for many countries around the world.
This is a massive setback for the global recovery.
In economic terms, growth is down and inflation is up. In human terms, people’s incomes are down and hardship is up .
These double crises—pandemic and war—and our ability to deal with them, are further complicated by another growing risk: fragmentation of the world economy into geopolitical blocs—with different trade and technology standards, payment systems, and reserve currencies.
Supply chains, R&D, and production networks would be broken and need to be rebuilt.
Poor countries and poor people will bear the brunt of these dislocations.
This fragmentation of global governance is perhaps the most serious challenge to the rules-based framework that has governed international and economic relations for more than 75 years, and helped deliver significant improvements in living standards across the globe.
It is already impairing our capacity to work together on the two crises we face. And it could leave us wholly unable to meet other global challenges—such as the existential threat of climate change.
It is a consequential moment for the international community.
The actions we take now, together, will determine our future in fundamental ways. It reminds me of Bretton Woods in 1944 when, in the dark shadow of war, leaders came together to envision a brighter world. It was a moment of unprecedented courage and cooperation.
We need that spirit today, as we face
The global recovery was already losing momentum before the war in Ukraine, partly because of Omicron-related disruptions.
In January, we cut our global growth forecast to 4.4 percent for 2022. Since then, the outlook has deteriorated substantially, largely because of the war and its repercussions. Inflation, financial tightening, and frequent, wide- ranging lockdowns in China—causing new bottlenecks in global supply chains—are also weighing on activity.
As a result, we will be projecting a further downgrade in global growth for both 2022 and 2023. Fortunately, for most countries, growth will still remain in positive territory. That said, the impact of the war will contribute to forecast downgrades for 143 economies this year—accounting for 86 percent of global GDP.
Yet, as you will see in our World Economic Outlook next week, prospects vary greatly across countries: from catastrophic economic losses in Ukraine, to a severe contraction in Russia, to countries facing spillovers from the war through commodity, trade, and financial channels.
Economies facing downgrades include net importers of food and fuel—in Africa, the Middle East, Asia, and Europe.
Higher commodity prices have lifted growth prospects for many exporters of oil, natural gas, and metals. But these countries are also impacted by higher uncertainty, and their gains are far from enough to offset an overall global slowdown, largely driven by the war.
At the same time, higher energy and food prices are adding to inflationary pressures, squeezing real incomes of households around the world.
Most emerging and developing countries are not just grappling with the economic fallout of the war, but also the scarring effects of the pandemic crisis. This includes job losses and learning losses—costs borne mostly by women and young people.
The recovery remains deeply divergent between rich and poor.
On top of this, the outlook is extraordinarily uncertain—well beyond the normal range. The war and sanctions could escalate. New Covid variants could emerge. Crops could fail.
Before the war, Russia and Ukraine provided 28 percent of global wheat exports; Russia and Belarus supplied 40 percent of exports of potash, a crucial fertilizer. Now, grain and corn prices are soaring, and leaders across Africa and the Middle East are telling me that supplies are running low.
Food insecurity is a grave concern. [Chart 3, below] We must act now with a multilateral initiative to bolster food security. The alternative is dire: more hunger, more poverty, and more social unrest—especially for countries that have struggled to escape fragility and conflict for many years.
Food and energy prices, along with supply chain issues, continue to push up inflation. For advanced economies, inflation is already reaching a four-decade high. And we now project it to remain elevated for longer than previously estimated.
This is the most universally complex policy environment of our lifetime—posing tremendously difficult choices