The war in Ukraine is like a powerful earthquake that will have ripple effects throughout the global economy, especially in poor countries, according to the head of the International Monetary Fund.
The conflict will lead to lower growth and faster inflation worldwide, Managing Director Kristalina Georgieva said Friday on an IMF panel about the lender’s strategy to support fragile and conflict-affected nations. Countries, businesses and households will face more serious debt problems after a jump in borrowing during the first year of the pandemic, she said.
Ukraine and Russia together account for more than a quarter of the global trade in wheat, and a fifth of corn sales. The longer Russian forces remain in Ukraine, the longer tractors and combines to harvest the nation’s crops stay idle, threatening food security far beyond the region, Georgieva said.
“We would have some very significant problems that would be particularly difficult for fragile states,” Georgieva said. The world tends to focus on “front-page issues, and not on this second- and third-order-of-impact consequences,” she said.
The IMF has a duty to “keep that full picture so that actions can be taken preemptively rather than responding at a much higher cost to the problem when it occurs,” Georgieva said.
In a blog post earlier this week, IMF economists laid out some of the ways that tremors from the war could spread through the world economy. They highlighted risks including unrest in regions like the Middle East and Africa, triggered by higher food costs, and fiscal strains in Europe where spending on energy security and defense is set to rise.
