The Russian Federation’s war with Ukraine has triggered a catastrophic humanitarian crisis and threatened the stability of geopolitical relations. Economic output in the Europe and Central Asia region is forecast to contract by more than 4.1% in 2022—the second major shock and regional recession in two years. Moreover, the war has added to mounting concerns of a sharp global growth slowdown. The economic impact of the conflict has reverberated through multiple global channels, including commodity and financial markets, trade and migration links, and confidence. Neighboring countries in the Europe and Central Asia region are likely to suffer considerable economic damage because of their strong trade, financial, and migration links with Ukraine and Russia.
Pandemic disruptions amid rising COVID-19 cases in some major economies have contributed to financial and commodity market volatility, and could ultimately weigh on global growth prospects.
The war has also raised the likelihood of a destabilizing wave of refugees, widespread financial stresses among some emerging and developing economies, a de-anchoring of inflation expectations, and food insecurity. A protracted conflict is likely to heighten policy uncertainty and fragment global trade and investment networks.
Policy makers need to ensure that they are better prepared to handle future crises as part of a commitment to a comprehensive approach to bolster resilient, inclusive, and green development. They should fortify their macroeconomic policy buffers and institutions to strengthen stability; promote an inclusive and more equal recovery by strengthening their social protection systems to protect the most vulnerable, including the refugees; and keep their focus on improving energy efficiency and green transition to secure a sustainable future
What WB said on Turkey?
Economic growth is expected to moderate to 1.4 percent in 2022 as macro-financial volatility intensifies and the impacts of Russia-Ukraine materialize, before returning to 3.2 percent and 4.0 percent in 2023 and 2024, respectively. Net exports are expected to drive growth in 2022, offsetting the drag from contractions in investment and private consumption.
Three Scourges of Turkish Economy: Unemployment, Inflation, and External Deficit | Real Turkey
Inflation is projected to accelerate further to 61 percent in 2022, assuming no change in the monetary policy stance and high global commodity prices.
In 2022 lower export growth and rising import prices are expected to widen the current account deficit to 6.4 percent of GDP. The general government deficit is projected to widen to 5.2 percent and 5.1 percent in 2022 and 2023, respectively, driven by rising public consumption, interest expenses, and current transfers.
Both external and domestic risks are tilted significantly to the downside. The Russia Ukraine war has raised considerable uncertainty around the outlook.
Ukraine Crisis Could Cost Turkey $30 Billion
The war could: continue to increase commodity prices and exacerbate inflation, disproportionately impacting the poorest households; undermine Turkey’s nascent tourism recovery; and spill over into Turkey’s financial sector by raising NPLs in affected corporate sectors.
Turkey is also vulnerable to tightening global liquidity conditions, given its high external financing requirements. The banking sector remains highly capitalized and with adequate FX buffers. However, removing forbearance measures is likely to pressure banks’ balance sheets. The slowdown in the economy and job creation in 2022, and persistently high inflation mean that the poverty rate is projected to reach 11 percent by 2024.
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