UN downgrades global economic growth outlook

• Published date: 18 May 2022
• Publication title: LETA

The global economy is expected to grow by only 3.1 percent this year, down from the 4.0 percent projected in January, largely derailed by the war in Ukraine, according to the UN's latest World Economic Situation and Prospects (WESP) report, launched on Wednesday.

The mid-year forecast reveals how the conflict has upended the fragile economic recovery from the COVID-19 pandemic, sparking a humanitarian crisis in Europe, surging food and commodity prices, and exacerbating inflationary pressures.

Global inflation is also set to reach 6.7 percent this year, or twice the average of 2.9 percent during the period from 2010 to 2020, with sharp rises in food and energy prices.

"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 António Guterres.

"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.

The downgrade in growth prospects includes the world's largest economies - the United States, China, and the European Union - as well as the majority of other developed and developing economies.

Higher energy and food prices are particularly affecting developing economies that import commodities, and the outlook is compounded by worsening food insecurity, especially in Africa.

The WESP report, published by the UN's Department of Economic and Social Affairs (DESA), examines how the spillover effects of the war in Ukraine are impacting different regions.

Neighbouring economies in Central Asia and Europe, including the European Union (EU), are also affected.

The rise in energy prices has dealt a shock to the EU, which imported nearly 57.5 percent of its total energy consumption in 2020. Economic growth is forecasted to grow by only 2.7 percent, instead of the 3.9 percent projected in January.

Nearly a quarter of Europe's energy consumption in 2020 came from oil and natural gas imported from Russia, and a sudden halt in flows is likely to lead to increased energy prices and inflationary pressures.

EU member states from Eastern...