United Nations Conference on Trade and Development (UNCTAD) has warned that global economic growth will decrease to 2.6% from 3.6% for 2022 due to the Ukraine war.
Additionally, the United Nations’ body said that developing countries will need US$310 billion to meet their external public debt service requirements this year.
In an update to its Trade and Development report published on 24 March, UNCTAD noted that while Russia will experience a deep recession this year, significant slowdowns in growth are also expected in parts of Western Europe and Central, South and South-East Asia.
“The ongoing war in Ukraine is likely to reinforce the monetary tightening trend in advanced countries following similar moves that began in late 2021 in several developing countries due to inflationary pressures, with expenditure cuts also anticipated in upcoming budgets,” said UNCTAD in an announcement.
The UN’s trade and development body is worried that a combination of weakening global demand, insufficient policy coordination at the international level and elevated debt levels from the pandemic, will generate financial shockwaves that can push some developing countries into “a downward spiral of insolvency, recession and arrested development”.
“The economic effects of the Ukraine war will compound the ongoing economic slowdown globally and weaken the recovery from the Covid-19 pandemic,” stated UNCTAD Secretary-General, Rebeca Grynspan, who added that “many developing countries have struggled to gain economic traction coming out of the Covid-19 recession and are now facing strong headwinds from the war.”
Rebeca Grynspan pointed out, “Whether this leads to unrest or not, a profound social anxiety is already spreading.”
Even without lasting financial market disruptions, developing economies will face severe constraints on growth, according to UNCTAD, which said that “during the pandemic, their public and private debt stocks have increased, while issues that receded from view during the pandemic, including high corporate leverage and rising household debt in middle-income developing countries, will resurface as policy tightens”