IMF: Russia's attack on Ukraine may 'fundamentally alter' global order

Russia's attack on Ukraine will affect the entire global economy, and could fundamentally reshape the global economic order in the longer term, according to the International Monetary Fund (IMF). 

The conflict is boosting prices for food and energy, fuelling inflation and eroding the value of incomes, while disrupting trade, supply chains and remittances in Ukraine's neighbours, the IMF said on Tuesday.

It is also eroding business confidence and triggering uncertainty among investors that will depress asset prices, tighten financial conditions and could trigger capital outflows from emerging markets, it added.

"The conflict is a major blow to the global economy that will hurt growth and raise prices," the IMF said in a post on its website.

IMF officials have already said they expect to lower the Fund's previous forecast for 4.4 percent global economic growth in 2022. In Tuesday's post, they suggested their regional growth forecasts would also be likely be revised downward. 

The IMF is due to release updated forecasts on April 19.

READ MORE: Refugees flee safe havens in west Ukraine as Russian offensive widens

Food insecurity likely to increase

Countries with direct trade, tourism, and financial exposures would feel mounting pressure, the IMF said, citing a greater risk of unrest in some regions, from Sub-Saharan Africa and Latin America to the Caucasus and Central Asia.

At the same time, food insecurity was likely to further increase in parts of Africa and the Middle East, where countries like Egypt import 80 percent of their wheat from Russia and Ukraine.

In the longer term, the conflict "may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings."

The IMF predicted deep recessions in Ukraine and Russia, and said Europe could see disruptions in natural gas imports and wider supply-chain disruptions.

Eastern Europe, which has absorbed most of the 3 million people who have fled Ukraine, would see higher financing costs as a result.

In the Middle East and Africa, worsening external financing conditions may spur capital outflows and add to growth headwinds for countries with elevated debt levels and large financing needs.

Food and energy prices are the main channel for spillovers in the Western Hemisphere, with high commodity prices likely to significantly quicken already high inflation rates in Latin America, the Caribbean and the United States.

In Asia, the biggest impact will be felt among oil importers of ASEAN economies, India, and frontier economies including some Pacific Islands, while new fuel subsidies could ease the impacts in Japan and Korea, the IMF said.

READ MORE: India in talks to buy cheap Russian oil as West shuns Moscow