War, stagflation threaten global economy as pandemic recovery slows

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Tue, 19 Apr 2022 - 03:23 GMT

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Tue, 19 Apr 2022 - 03:23 GMT

IMF building- Reuters

IMF building- Reuters

LONDON - 19 April 2022: The twin perils of slowing growth and high inflation, or stagflation, will hit the global economy this year as Russia’s war against Ukraine exacerbates a slowdown in the recovery from the coronavirus pandemic, according to Financial Times research.
 
Mounting price pressures, slipping output expansion and sagging confidence will all pose a drag for most countries, according to the latest Brookings-FT tracking index.
 
As a result, policymakers will be left with “grim quandaries”, said Eswar Prasad, senior fellow at the Brookings Institution.
 
The IMF is this week expected to downgrade its forecasts for most countries as finance ministers and central bankers convene at the spring meetings of the fund and the World Bank to discuss how to respond to the darkening economic outlook.
 
Policymakers must work out how to address rapidly rising prices and the dangers of raising interest rates when debt levels are already high.
 
Kristalina Georgieva, IMF managing director, on Thursday called the war in Ukraine a “massive setback” for the global economy.
 
Prasad said there was a risk that 2022 could become “a fraught period of geopolitical realignments, persistent supply disruptions and financial market volatility, all against the background of surging inflationary pressures and limited room for policy manoeuvre”.
 
The Brookings-FT Tracking Index for the Global Economic Recovery (Tiger) compares indicators of real activity, financial markets and confidence with their historical averages, both for the global economy and individual countries, capturing the extent to which data in the current period is better or worse than normal. 

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