War in Ukraine weighs heavily on East Asian economies


In today’s hyper-connected world, with its interconnected economies, migrant diasporas and 24-hour news channels, it is no surprise that the effects of the war in Ukraine are felt in the whole world. The war has upended a fragile post-pandemic economic recovery, triggering not only a devastating humanitarian crisis, but also rising food and commodity prices and exacerbating inflationary pressures around the world.

A new forecast released this week by the United Nations Department of Economic and Social Affairs shows how badly the global outlook has deteriorated. According to the global economic situation and outlook as of mid-2022, the global economy is now expected to grow only 3.1% in 2022, down from the 4.0% growth forecast released in January. . Global inflation is expected to increase to 6.7% in 2022, more than double the average of 2.9% over the 2010-2020 period, with sharp increases in food and energy prices.

Overall, the deterioration in growth prospects is widespread, including for the world’s largest economies, the United States, the European Union, China and the majority of developing economies.

Why does this happen? Growing geopolitical and economic uncertainties are undermining business confidence and rising borrowing costs are weakening investment prospects. In addition, there are significant downside risks related to a further escalation of the war in Ukraine, new waves of the pandemic and faster than expected monetary tightening in developed economies.

All of this takes our efforts to achieve the global Sustainable Development Goals (SDGs) further away from the 2030 target.

For China, growth prospects have been clouded by the rising number of Covid-19 cases and the corresponding measures put in place. The economy is now expected to grow 4.5% in 2022, down 0.7 percentage points from the previous forecast and less than its 8.1% growth in 2021.

Prolonged supply chain disruptions and soaring commodity prices have contributed to rising manufacturing costs in the region, making it harder for people in many countries to obtain the goods they need. need.

In addition, while China has actively eased monetary policy, Indonesia, Malaysia, Mongolia and Singapore have entered or are expected to enter a tightening phase in 2022. Other central banks remain hesitant to tighten policy, given the fact that higher interest rates likely have a negative impact on growth and recovery. With the exception of Laos, Mongolia and Myanmar, inflation in the region is expected to remain below 5%.

However, the expected rebound of the Chinese economy by the end of 2022 and a recovery in international tourism should support growth in the region in 2023. The developed economies of East Asia, although still at the behind other countries in the region, are expected to record resilient economic growth in 2022, with GDP increasing by 2.7% in Japan and 3.1% in the Republic of Korea.

As always, it is the most vulnerable people in Asia and around the world who are suffering the most from slow growth, rising inflation and disruptions to the energy and food system resulting from the war in Ukraine. Falling real incomes are of particular concern in developing countries where poverty is more widespread, wage growth remains limited and fiscal support measures to mitigate the impact of higher oil and food prices are more limited.

In these countries, many of which are still struggling to recover from the economic shocks of the pandemic, food insecurity is worsening and many are at risk of falling into poverty. In these situations, women and children are often the most vulnerable, especially when poor nutrition impacts health and well-being throughout life.

To counter this, governments must provide targeted support to mitigate the effects of rising food and fuel prices on vulnerable populations, while pursuing medium-term fiscal and debt sustainability. This will require strengthening social protection, accompanied by comprehensive debt restructuring and debt relief for the poorest countries, especially the least developed countries. Closing the financial gap, while ensuring that resources catalyze the necessary transformations, will be key to putting the SDGs back within reach.

Finally, the war in Ukraine is taking place at a time when global CO2 emissions have reached an all-time high. The conflict will have a significant impact on the global fight – for better or for worse – against the climate emergency by driving up energy prices and putting energy security at the heart of policy-making in many locations.

Asian countries are well positioned to be leaders in climate action by accelerating the adoption of renewable energy sources, reducing fossil fuel consumption and increasing energy efficiency – measures that will benefit their economies down the road. long term and secure their energy future. – June 9, 2022.

* Shantanu Mukherjee is Director of the Economic Analysis and Policy Division of the United Nations Department of Economic and Social Affairs.

* This is the opinion of the author or publication and does not necessarily represent the views of The Malaysian Insight. The article may be edited for brevity and clarity.


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