Global growth projected at 3.1%, down from 4%
It was supposed to be the year things got better and the world emerged from the pandemic to be vibrant once more. Then came the omicron wave. Then Russia invaded Ukraine and already-high energy prices soared. Supply chain woes continued as China locked down various cities for various lengths of time. Inflation persisted worldwide.
With all that, the U.N. has dropped its economic forecast for global growth to 3.1% from earlier prognostications of 4%. The U.N. Department of Economic and Social Affairs has issued a report that warns the world economy “faces significant downside risks from further intensification of the war in Ukraine and potential new waves of the pandemic.”
“This slowdown and the war in Ukraine — triggering sharp increases in food and fertilizer prices — will hit the developing countries particularly hard, exacerbating food insecurity and increasing poverty.”
Global inflation is on pace to be 6.7% this year, more than twice the average from 2010-20. Stalled economic progress in the U.S., European Union, and China will hit especially hard. The Federal Reserve is taking strong action to reel in what its board thinks is an overheated economy. The E.U. is redrawing its energy strategy on the fly as it works to minimize imports of oil and natural gas from Russia. Rolling lockdowns in China have dropped its GDP growth forecast to 4.5% for the year, down from the 8.1% growth it posted in 2021.
“The resulting slowdown in economic activities contributed to prolonging supply chains disruptions, negatively affecting other developing countries through trade channels,” the U.N. report said. “In addition, soaring commodity prices contributed to higher manufacturing costs across the region, adversely affecting exports.”
Fearing a recession, the Dow Jones lost more than 1,100 points Wednesday, more than 3.5% of its value. The S&P 500 was down more than 4%, and the Nasdaq lost 4.73%.