Energy and commodity prices-including wheat and other grains-have surged due to the war in Ukraine, adding to inflationary pressures from supply chain disruptions and the rebound from the Covid-19 pandemic, the IMF has said.
Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses.
“Should the conflict escalate, the economic damage would be all the more devastating. The sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries,” IMF said.
Expressing concerns over “already very serious” economic consequences of the Russia-Ukraine conflict, the International Monetary Fund (IMF) has said “price shocks” will be felt worldwide due to high inflation amid supply chain disruptions.
The war in Ukraine is resulting in tragic loss of life and human suffering, as well as causing massive damage to the country’s physical infrastructure, the global financial body said in a statement on Saturday.
The war crisis in Ukraine has sent a wave of more than 1 million refugees to neighboring countries, it added.
The IMF’s executive board held a meeting on March 4, chaired by Managing Director Kristalina Georgieva, to assess the economic impact of the war in Ukraine, and “discuss possible fast-tracked financial assistance for affected countries”, the statement said.
While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious, it noted.
In many countries, the crisis is creating an adverse shock to both inflation and activity, amid already elevated price pressures, the financial body added.
It suggested monetary authorities to carefully monitor the pass-through of rising international prices to domestic inflation, to calibrate appropriate responses.
This crisis, it said, will create complex policy tradeoffs, further complicating the policy landscape as the world economy recovers from the pandemic crisis.
