Fund also sees prolonged inflation and risks of further shortages.
The International Monetary Fund chopped its global economic growth forecast by 0.8pp to 3.6% this year as Ukraine's GDP may plunge 35% amid Russia's invasion, and warned central banks face tougher choices in responding to the resulting new round of supply disruptions.
Russia's output may shrink 8.5%, and the euro area's growth is seen 1.1pp lower than previously at 2.8% according to the fund's World Economic Outlook . U.S. growth was lowered 0.3pp to 3.7% amid rising interest rates and China's by 0.4pp to 4.4% amid tough Covid lockdowns and a fragile real estate sector.
The IMF reduced the 2023 global growth estimate 0.2pp to 3.6% from its prior World Economic Outlook projection from January, and said medium-term growth beyond that has been lowered to 3.3%. Global output grew 6.1% last year.
"Overall economic risks have risen sharply, and policy tradeoffs have become even more challenging," including from slow progress distributing Covid vaccines and potential escalation of the war that's already displaced 5 million people, IMF research director Pierre-Olivier Gourinchas wrote.
The IMF raised its 2022 inflation forecasts by 1.8pp to 5.7% in advanced economies and by 2.8pp to 8.7% in emerging market and developing economies.
"The risk is rising that inflation expectations drift away from central bank inflation targets, prompting a more aggressive tightening response from policymakers," the IMF said. "Increases in food and fuel prices may also significantly increase the prospect of social unrest in poorer countries."