The world economy is constantly changing, and it can be tough to keep track of what’s going on. As the summer is approaching its end, we will provide a summary of the world economy in 2022. By understanding the current trends, you can better prepare yourself for what’s to come in the near future, whether you work in finance or even aussie casinos online!
War in Ukraine
The Russian war in Ukraine is slowing down the Western economy. And this is only the start. Statistics from the first quarter of 2022 showed that before the world fully felt the economic effects of Russia’s war on Ukraine, prosperity growth in Europe slowed and entirely reversed in the United States.
Since only the final of the quarter’s three months fell on the Russian invasion, the primary causes are unrelated to the conflict. The pattern, however, supports analysts’ initial predictions, which foretell harm to not only Russia and Ukraine but also to the rest of the world, most notably to Europe.
During the months of January through March, the expansion of the European economy slowed by 0.1 percentage points, to 0.5 percent in 27 EU nations and to 0.2 percent in 19 countries where the euro was in use. The first quarter of 2018 in the US saw a 0.4 percent fall in GDP.
The rise in business activity following two years of lockdowns resulted in a lack of energy, food, and transportation by the end of 2021, which is what is causing the slowdown in economic activity. This exacerbated inflation and disrupted global trade. Consumption is diminishing as a result of consumers saving more as life costs rise, investing less, and lending rates increasing in tandem with price increases.
Since Russia is the biggest exporter of oil and gas and, along with Ukraine, is also the top source of food, the war will only make these issues worse. As a result, the decision by Vladimir Putin to send forces to invade a neighbouring nation led to a new uptick in the price of all commodities including oil, gas, coal, grain, and metals.
As a result, the IMF predicts that this year’s global economic rebound won’t be more than 3.6 percent, down from the IMF’s January prediction of 4.4 percent. In other words, the world will end the year in a poorer state than it may have been in the absence of the war.
The IMF projects that Ukraine would lose 35 percent of its GDP and that Russia, which attacked Ukraine, will experience an 8.5 percent decrease as a result of sanctions, company closures, and emigration. The IMF and the OECD Club of Rich Countries warn that the first countries affected by this crisis will be their European counterparts.
Europe In Possible Crisis?
After a two-year epidemic, Europe is unable to recover due to the eastern conflict. Germany’s largest economy in the EU is still over 1% smaller than it was before December 2019, and a full-scale gas war with Russia threatens to cause a decline of 2% for the energy-consuming industrial power.
On the one hand, the global economy only gives Russia and Ukraine a minor role. According to the OECD analysts, they only make up around the same amount of global trade and less than 2% of GDP. On the other hand, they are major suppliers of a variety of goods, which has a significant impact on the world economy.
As a result, during the first full year of the conflict, the world will see a loss of growth of around 1%, with Europe suffering a 1.5 times greater hit than the US.
The OECD experts note that close trade ties and high gas prices in Europe are the results of a partial energy blockade by Russia in the months before the attack on Ukraine. According to the IMF, which reduced its prediction for eurozone GDP growth to 2.8% from 3.9 percent, Germany and Italy will suffer more than other countries.
Germany, the largest economy in the EU, and Italy, which is third, are both industrial heavyweights that rely significantly on Russian oil and gas. France, the second-largest EU member, imports hydrocarbons from countries other than Russia and exports electricity as a result of its nuclear energy program.
These predictions, however, do not account for a different war—the one over energy. The economic harm to Europe is expected to increase significantly. This week, when Russia turned off the gas to Poland and Bulgaria, the conflict began to flare up. The European Union will discuss extending sanctions, including an embargo on Russian oil, next week as part of the reaction.