Home Business News IMF warns of social unrest as food prices, energy, fuel and the cost of living are all soaring amid the Russian invasion of Ukraine

IMF warns of social unrest as food prices, energy, fuel and the cost of living are all soaring amid the Russian invasion of Ukraine

by LLB Finance Reporter
19th Apr 22 3:50 pm

The International Monetary Fund (IMF) warned on Tuesday that the pace of price rises in developing countries will be damaging for global growth prospects, in their latest World Economic Outlook.

The IMF said that there could be social unrest as food prices, energy, fuel and the cost of living are all soaring, they warned over their assessment of the Russian invasion of Ukraine.

The Ukraine’s economy will contract by more than a third and the IMF have now cut their forecast for global growth this year from 4.4% to 3.6%.

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The IMF said that the Russian economy  will contract by 8.5% this year and the country are to face their largest recession since the collapse of the Soviet Union amid sanctions.

Pierre-Olivier Gourinchas, the IMF’s recently-appointed chief economist said, “The economic effects of the war are spreading far and wide – like seismic waves that emanate from the epicentre of an earthquake.

“In the matter of a few weeks, the world has yet again experienced a major, transformative shock. Just as a durable recovery from the pandemic-induced global economic collapse appeared in sight, the war has created the very real prospect that a large part of the recent gains will be erased.

“The long list of challenges calls for commensurate and concerted policy actions at the national and multilateral levels to prevent even worse outcomes and improve economic prospects for all.”

The UK’s economy are to face a one percentage point cut in growth for 2022 and Germany and Italy who have direct links to Russia and Ukraine economies will face a 1.7 and 1.5 percentage point cut respectively.

The IMF said that there will be a sharp increase of inflation across economies and warned the Consumer Price Index (CPI) is expected to rise to an average of 7.4% in the UK and 7.7% in the US for 2022.

They warned that this could create its own chain reaction, “There is a rising risk that inflation expectations become de-anchored, prompting a more aggressive tightening response from central banks.”

“The war in Ukraine has increased the probability of wider social tensions in the near term through two main channels,” the IMF said.

“The first is a further sharp rise in global fuel and food prices-a particular concern in emerging market and developing economies with limited fiscal space that are highly dependent on energy and food imports for basic consumption.

“This could intensify commodity hoarding, export controls, and domestic restrictions-with further knock-on effects on supply disruptions, prices, and social unrest.

“The second is the longer-term impact of the humanitarian crisis.”

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