IMF "Fundamental Restructuring of the World Order Due to Ukraine"

Three Economic and Geopolitical Impacts
① Rising Raw Material Prices → Inflation ② Eastern Europe Trade and Supply Chain Collapse ③ Increased Corporate and Financial Uncertainty

[Photo by Reuters]

[Asia Economy Reporter Park Byung-hee] The International Monetary Fund (IMF) has assessed that Russia's invasion of Ukraine could fundamentally change the global economic order.

According to major foreign media on the 16th (local time), the IMF stated in a post on its website on the 15th that Russia's invasion of Ukraine would lower global economic growth rates and significantly raise inflation, potentially leading to a fundamental reorganization of the economic and geopolitical world order.

The IMF diagnosed that this war could impact the global economic and geopolitical order in three dimensions.

First, it analyzed that rising commodity prices would deepen inflation, which would lead to a decrease in real income and a reduction in demand.

Second, it predicted that trade and supply chains in Eastern European countries surrounding Ukraine would collapse, overseas workers' remittances to their home countries would decrease, and the surge in refugees would cause difficulties.

Lastly, the IMF warned that sluggish corporate investment and increased uncertainty in financial markets would burden asset prices, worsen liquidity conditions in financial markets, and potentially trigger capital outflows from emerging markets.

In the long term, the IMF assessed that this war would fundamentally change the economic and geopolitical world order, cause changes in energy trade and supply chains, fragment payment networks, and prompt countries to reassess their foreign exchange reserve assets.

The IMF also analyzed the impact of this war by region.

The IMF predicted that the economies of Russia and Ukraine would fall into a deep recession, Europe would face a collapse in natural gas supply and widespread supply chain disruptions. It also pointed out that European countries would need to increase government spending for energy procurement and defense enhancement, which could intensify fiscal pressures. In particular, it expected that financial costs would rise in Eastern Europe, where more than 3 million Ukrainian refugees are expected to concentrate.

Regarding Africa and the Middle East, the IMF explained that these regions could suffer from food supply instability, noting that countries like Egypt import 80% of their wheat from Russia and Ukraine. Rising food prices could cause social unrest in countries lacking social safety nets, jobs, and sufficient government fiscal capacity.

For Central Asia, the IMF anticipated that trade, international remittances from overseas workers, and investment would decline due to close connections with Russia through trade and payment systems.

In Asia, oil-importing countries are expected to suffer the most, but South Korea and Japan could mitigate the shock through subsidies. It also predicted that China’s government stimulus measures aimed at achieving a 5.5% economic growth target this year could reduce the impact. Additionally, Asian countries mainly consume rice rather than wheat as staple food and have substantial domestic production, so the pressure from rising food prices would be less.

This content was produced with the assistance of AI translation services.