New threats of war for the global economy –

“The war came at a time when Europe and the United States showed an excellent recovery,” said Jacob Kirkegaard of the German Marshall Fund think tank.

The head of the European Central Bank (ECB), Christine Lagarde, admitted on Thursday that the Russian invasion “significantly increases risks” in just two weeks.

The currency lowers the midpoint of the eurozone’s projected gains in 2022 to 3.7%. The International Monetary Fund (IMF) also warned it would cut interest rates.

Rating agency S&P Global predicts a drop of 0.7 percentage points from the global increase of 3.4% for expected GDP growth and energy profits. According to Jean-Pisani Ferry, an economist at the Bruegel Institute, the war in Ukraine could cost the European Union (EU) 175 billion euros ($192 billion) in energy prices, hosting refugees and providing budget support.

STANFLATION. But Kirkegaard fears not major recessions, but stagflation, a phenomenon that combines stagnant growth with high inflation.

This inflation is permanent after one year. Originally linked to supply chain disruption, commodity prices are now forced to rise, putting pressure on businesses’ production costs and household purchasing power.

“Ours is facing an oil crisis, a gas crisis and an electricity crisis. “This coincidence has never been seen before,” said Thomas Pellerin-Carlin of the Jacques Delors European Institute.

Jerome Powell, chairman of the US Federal Reserve, stated that this increase of 10 petrodollars represents an increase of 0.1 percentage point and an inflation of 0.2 million. His country recorded 7.9% inflation in February.

In addition to hydrocarbons, the prices of aluminum, nickel, wheat and maize also stagnated.

Russian President Vladimir Putin may go so far as to counter the boomerang effect of Western sanctions against his country.

Most industries are affected by rising prices.

In Spain, for example, steel mills have already closed and heating, travel and food are generally more expensive.

“The price of bread has risen” in Egypt, the world’s largest wheat importer, 31-year-old Cairo resident Omar Azzam, told AFP. It has increased by 50% since the invasion of Ukraine.

Europe and Africa in general will be “deeply destabilized on food” for the next 12 to 18 months, with French President Emmanuel Macron not meeting Friday, especially at the European summit in Versailles. Crops in Ukraine, especially wheat.

The G7 countries also urged the international community on Friday to refrain from measures that would hinder the export of food products.

The phrase “whatever it takes”, popularized in 2012 by then ECB President Mario Draghi, was translated with the joint debt issuance into a historic recovery plan for the EU in 2020.

The United States adopted some major plans to support the economy, as did Japan.

However, in the context of distorted public finances, on this occasion, aid should be more selective and allocated to those affected by inflation.

When it comes to companies, investors expect “light stress,” not defaults, said Christophe Barraud, an economist at investment firm MarketSecurities. Developing countries, which are more vulnerable to inflation in the country, may weaken their situation, including political stability.

China, the world’s factory, continues to fight the coronavirus and has just reached a population of nine million, despite moving forward.

“If that happens, the economy will slow down drastically. They will shut down everything they can. This uncertainty is as great as war,” Kirkegaard warned.

Source: Ulti Mahora

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