Russia-Ukraine war to shock world economy, World Bank response to dwarf Covid action
World Bank President David Malpass told reporters on a conference call on Monday that while the war is the main reason for the downward revision, higher energy and food prices will also dampen economic growth. Western sanctions against Russia have pushed up energy prices around the world, and the war in Ukraine is threatening food supplies.
CNBC reminded that Russia has blockaded Ukraine’s major Black Sea ports, making it extremely dangerous for shipping vessels carrying grain and other products to travel the key maritime pathway connecting Ukraine to the rest of the world.
Malpass said he was "deeply concerned about developing countries" that are "facing sudden price increases for energy, fertilizer, and food, and the likelihood of interest rate increases."
Food crises are bad for everyone, but they're devastating for the poorest and most vulnerable,
he said, adding that the two reasons behind this is that (i) the world's poorest countries tend to be food importing countries, and (ii) food accounts for at least half of total expenditures in household budgets in low-income countries, so it hits them hardest.
The international community needs to immediately step up emergency assistance for food insecurity and help bolster social safety nets,
stressed Malpass.
The World Bank is providing roughly $17 billion per year to strengthen food security – a big part of the global effort, he noted.
The World Bank is proposing a new 15-month crisis response envelope of around $170 billion to cover April 2022 through June 2023.
Malpass said around $50 billion of this amount is expected to be committed in the next three months.
In comparison, the World Bank's COVID-19 response, which is still underway, reached $157 billion in the 15 months ending June 2021.
The most serious impacts will, of course, be in Ukraine and to a lesser extent in Russia. The World Bank forecasts a 45% annual GDP contraction for Ukraine, an astonishing figure for a country of more than 40 million people. Before the crisis, economists were projecting robust economic growth in the coming years in Ukraine.
Malpass said yesterday the bank had quickly disbursed about $600 million of an initial $1 billion in aid promised for Ukraine, and was now working to raise another $1.5 billion in bank funds that still needed to be approved by its board.
There will be other components making up the $3 billion that we originally announced six weeks ago or so,
Reuters cited Malpass as telling reporters, noting that the bank's International Finance Corp was also providing working capital and trade finance for companies doing business in Ukraine.
Russia's economy will take a major hit from Western sanctions, with the World Bank forecasting a GDP contraction of over 11% this year.
Cover photo: Getty Images
