THE United Nations Conference on Trade and Development (UNCTAD) on Thursday lowered its growth estimates for Southeast Asia and the world due to shocks from Russia’s invasion of Ukraine and changes in macroeconomic policies that put developing countries at risk.
In report, the UN body changed the projection for Southeast Asia to 3.4% from 4.7% and to 2.6% for global growth from 3.6%.
“Global growth prospects for 2022 will be affected by downside risks to both supply and demand, compounded by the war in Ukraine,” it said. “On the supply side, persistent disruptions will continue to hamper economic activity.”
It also said macroeconomic tightening would weaken demand, while rising prices would erode real incomes and dampen investor confidence. “These pressures will only deepen the geographical, financial and socioeconomic fractures that marked the recovery in 2021.”
It said global growth this year would be slower, more uneven and more fragile than it expected in September. “Our estimates incorporate the two main new features of the world economic situation: The war in Ukraine and tightening macroeconomic policy in developed economies.”
The economic impact of the war had led it to significantly lower growth estimates as incomes are affected by spiraling food and fuel prices, UNCTAD said.
It added that global trade has been curtailed by sanctions, while issues on confidence and financial instability have resurfaced.
“As a result of the conflict, oil and gas prices have surged from already elevated levels, wheat prices have reached levels not seen since the late 2000s, and a wide range of other items including fertilizers, metals and manufacturing inputs are facing severe supply shortages,” the UN body said.
UNCTAD said some countries might take advantage of higher prices and demand for their commodity exports, while developing countries would face harder economic challenges.
“Hardly any country will be immune from the deterioration of global growth prospects, although a few may benefit from higher prices and demand for their commodity exports,” it said.
“On the other hand, developing economies that were in a precarious situation due to debt obligations, supply shocks and term-of-trade and exchange rate swings will see their economic performance deteriorate even further,” it added.
The Russia-Ukraine war had caused disruptions to global trade and is likely to have longer-term effects on its structure.
“In the short term, price effects and scarcity are spilling over onto economies more dependent on Ukrainian and Russian exports, especially of commodities, ranging from oil to minerals and food,” it added.
Sought for comment, Foundation for Economic Freedom President Calixto V. Chikiamco said via Viber message that UNCTAD might be conservative on its projection.
“The UNCTAD projection may be on the conservative side, perhaps due to the uncertainty how the Ukraine war will end and many are oil importing nations. Also, another possible headwind is if China, which is a major trading partner of Southeast Asia, goes into lockdown due to the rising COVID-19 cases,” Mr. Chikiamco said. — Revin Mikhael D. Ochave