Next Year's Global Economy as Fragile as in 2009... "Depends on the Ukraine War"

[Image source=EPA Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] A warning has been issued that the global economy next year will be as vulnerable as it was in 2009, right after the financial crisis. In particular, the impact depends on the prolonged situation of the Ukraine war.

The International Institute of Finance (IIF), headquartered in Washington DC, USA, forecasted in a report on the 24th (local time) that the global economic growth rate next year will slow down to 1.2%. This is as low as the level in 2009 when adjusted for the base effect.

Robin Brooks, IIF Chief Economist, predicted, "The severity of the world's gross domestic product (GDP) next year depends on the trajectory of the Ukraine war." He explained, "The Ukraine war has an 'existential' meaning for Russian President Vladimir Putin," adding, "Our baseline forecast is that the war could continue until 2024."

Accordingly, the economic slowdown is expected to be most pronounced in Europe, where the impact of the Ukraine war is greatest. The IIF estimated that the Eurozone economy will contract by 2% next year as consumer and business confidence sharply decline. On the other hand, the US GDP is expected to grow by 1%. South America is also expected to grow by 1.2%, supported by rising food and raw material prices. This is higher than the forecasts previously presented by organizations such as the Organisation for Economic Co-operation and Development (OECD).

[Image source=EPA Yonhap News]

The IIF pointed out that although the scale of debt, which can be called the trigger of the global economy, has recently decreased, interest burdens have increased due to simultaneous interest rate hikes in major countries. Furthermore, it predicted that the biggest growth driver of the world economy next year will be China, which is expected to ease COVID-19 quarantine regulations. Considering this, the recent serious resurgence of COVID-19 in China could also become a major variable for the global economy next year.

Brooks, the chief economist who led the report writing, is the person who accurately predicted that the euro and the dollar would reach parity at 1 to 1 at the beginning of the year. Bloomberg News also reported that he became a topic of discussion for accurately forecasting the rally of the Brazilian real.