The direct impact of the conflict on China is likely to be relatively small, the IMF said Thursday.
The global economic fallout from the war in Ukraine is expected to negatively impact the Indian economy, while the direct impact of the conflict on China is likely to be relatively small, the IMF said Thursday.
“The global economic impact of the war is expected to negatively impact the Indian economy through a number of channels, which are different from those impacting the Indian economy during COVID-19,” said Gerry Rice, director of the communications division of the United States. the International Monetary Fund, to reporters here.
Rice said the sharp rise in global oil prices represents a major trade shock with macroeconomic implications.
It will lead to higher inflation and a current account deficit, he said when Russia launched a “special military operation” against Ukraine on Feb. 24.
“But the current account impact may be partially offset by favorable price developments of commodities that India exports, for example wheat,” he said.
Rice said the negative impact of the war in Ukraine on the economies of the US, EU and China could dampen external demand for India’s exports, while supply chain disruptions could negatively affect India’s import volumes and prices. .
“There is also the issue of tightening financial conditions and heightened uncertainty, which could impact domestic demand and the fiscal position through higher borrowing costs and diminished confidence,” he said.
According to the IMF, there is a lot of uncertainty about the outlook for India.
“In summary, I think there is a lot of uncertainty about the outlook for India. That uncertainty is clear, I would describe it as elevated and will again depend on the magnitude and persistence of the shock, and whether other macroeconomic risks materialise. And of course the government’s policies in response to this difficult situation,” Rice said.
On the other hand, the IMF said the immediate impact of the war on China will be less.
“The direct impact of the conflict on China is likely to be relatively small. The higher oil price could affect domestic consumption and investment going forward, but price caps will limit the impact, Rice added.
According to the IMF official, Chinese exports to Russia generally account for a relatively small share of total exports.
“However, China would be hit if trading partner growth slowed significantly, if there were severe supply-side disruptions or if global financial markets were more severely affected,” Rice said.
The IMF is expected to release its latest economic outlook report next month.
Rice said the IMF’s growth forecast is likely to be revised downwards next month.
“Then we will be able to provide a more complete picture of the impact of the war on the global economy and on developing countries,” he said.
It is clear that the crisis is adding to the already difficult trade-offs in Asia; with rising inflation, limited fiscal space and the prospect of rising global interest rates amid high government and corporate debt.
“The severity and duration of the conflict will be a key factor in determining whether Asian central banks can see beyond this current rise in commodity prices in China,” Rice said.
The US and other Western countries have imposed strict economic sanctions on Russia to punish Moscow for invading Ukraine.
This post The global economic impact of the war in Ukraine is expected to negatively affect the Indian economy: IMF was original published at “https://www.financialexpress.com/economy/global-economic-fallout-of-war-in-ukraine-is-expected-to-negatively-impact-indian-economy-imf/2464458/”