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Russia-Ukrainian Conflict Will Cost Global Economy $1.6 Trillion In 2022

The ongoing conflict between Russia and Ukraine is set to cost the global economy $1.6 trillion in 2022, according to a study by the German Economic Institute (IW). The study highlights the impact of the conflict on the global supply chain, with companies around the world under pressure from energy and raw material supply problems.

Michael Gromling, an expert at the IW Institute, commented on the profound effect that such conflicts have on the global economy. The West was particularly affected by the loss of two-thirds of global production, leading to unexpected changes in production costs and a difficulty for many companies. This has resulted in increasing consumer prices, dragging on household purchasing power until consumption contracted. The high energy prices also caused companies to be reluctant to invest due to global volatility and rising prices.

Germany, which has the largest economy in Europe, has been hit hard by soaring energy prices. Inflation in January held steady at 8.7%, but had temporarily pushed inflation above the 10% threshold in 2022 before mitigation measures pull prices down again.

The IW Institute forecasts an additional global value-added loss in 2023 of US$1 trillion, with no signs of improvement this year. Raw material shortages and volatility will persist for years to come, according to the study.

The International Monetary Fund (IMF) slightly raised its global growth forecast for 2023 in January from 2.7% to 2.9%. However, the conflict between Russia and Ukraine remains a major concern for the global economy, with the IW Institute warning of continued impact on the global supply chain and economic growth.

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