Without the Russia-Ukraine conflict, the global economy would have generated an additional $1.6 trillion in 2022, according to a study published by the German Economic Institute (IW) on Tuesday.
The conflict has a “high global economic significance,” IW expert Michael Groemling said in a statement. Above all, energy and raw material supply problems were putting pressure on companies worldwide.
Western economies were particularly affected as they lost two-thirds of their global production, according to the study.
In Germany, Europe’s largest economy, soaring energy prices pushed inflation temporarily above the 10 percent mark in 2022 before relief measures brought prices down again. In January, inflation stabilized at 8.7 percent, according to provisional data published by the Federal Statistical Office.
“High energy prices caused cost shocks at the production level, which became a burden difficult to calculate for many companies,” the IW said.
The resulting rise in consumer prices “eroded the purchasing power of households, which cut back their consumption,” the institute noted. Finally, companies were reluctant to invest due to the global uncertainty and higher prices.
For 2023, the IW projects an additional global value-added loss of $1 trillion. “Unfortunately, the all-clear is not yet in sight this year,” Groemling said, warning that raw material shortages and uncertainty would “continue to occupy us beyond 2023 and cost prosperity.”
The International Monetary Fund (IMF) last month raised its forecast for the global economy in 2023 slightly, expecting growth of 2.9 percent instead of 2.7 percent. China’s “recent reopening has paved the way for a faster-than-expected recovery,” the IMF noted.