THE International Monetary Fund (IMF) has projected a slowdown in global economic growth to 3.6% from an initial estimate of 6.1%, blighting prospects of strong recovery by low-income countries such as Zimbabwe.
Experts say Zimbabwe, which is currently battling rising inflation, a weakening currency, power outages and high unemployment, will also feel the pinch.
As the world was beginning to cope with Covid-19 following the rolling out of vaccination programmes across the world, attention was turned to Russia’s invasion of Ukraine on 24 February.
In most parts of the world, especially grain and fuel importers, the impact of the Ukraine war has been felt through the increases in prices. In March, Brent Crude Oil peaked at US$139, but most of the gains were lost and it settled above US$100, higher than the pre-war price which hovered in the US$90s.
The IMF, in its latest report titled World Economic Outlook: War Sets Back the Global Recovery, said the war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution, adding that economic damage from the conflict will contribute to a significant slowdown in global growth in 2022.
The authorities in Harare have projected 5.5% growth of the economy for 2022 from 7.8% registered last year mainly driven by strong agricultural output and mining.
However, as the war rages on, Zimbabwe, which heavily relies on wheat from Russia, has not been spared. Already, the World Food Programme has warned of an impending food crisis in the country after global and regional food prices spiked upwards following Russia’s invasion of Ukraine.
According to the United Nations High Commissioner for Refugees (UNHCR), by the end of March there were over 900 civilian deaths, over 2 600 civilian casualties and over four million refugees had fled Ukraine.
This conflict has destabilised the region and raised tensions with Russia’s neighbours, especially the North Atlantic Treaty Organisation (Nato) members, namely Latvia, Estonia, Lithuania, and Poland.
“A severe double-digit drop in GDP for Ukraine and a large contraction in Russia are more than likely, along with worldwide spillovers through commodity markets, trade, and financial channels. Even as the war reduces growth, it will add to inflation,” reads the IMF report.
“Fuel and food prices have increased rapidly, with vulnerable populations—particularly in low-income countries— most affected. Elevated inflation will complicate the trade-offs central banks face between containing price pressures and safeguarding growth. Interest rates are expected to rise as central banks tighten policy, exerting pressure on emerging market and developing economies. Moreover, many countries have limited fiscal policy space to cushion the impact of the war on their economies.
“The invasion has contributed to economic fragmentation as a significant number of countries sever commercial ties with Russia and risks derailing the post-pandemic recovery. It also threatens the rules-based frameworks that have facilitated greater global economic integration and helped lift millions out of poverty.”
With a few exceptions, employment and output, according to the IMF, will typically remain below pre-pandemic trends through 2026.
“Scarring effects are expected to be much larger in emerging market and developing economies than in advanced economies — reflecting more limited policy support and generally slower vaccination — with output expected to remain below the pre-pandemic trend throughout the forecast horizon,” the report further reads.
Early this month, the Confederation of Zimbabwe Industries said the country should this month brace for full-impact volatilities from the Russia-Ukraine war.