The financial leaders of the world’s most powerful countries warned this week of the potential for a global economic slowdown, as the threats caused by Russia’s invasion of Ukraine continued to multiply.
Globally, the war is sending energy and food prices soaring. In the United States, Britain and Europe, central banks determined to curb inflation are moving to hike interest rates, which risks pushing nations into recession. The developing world faces an emerging debt crisis on top of a growing hunger problem sparked by the war.
In the United States, as in much of the rest of the world, gasoline prices surged and stock markets plunged, with the S&P 500 index nearing a bear market, closing the week down 18 percent off its early January peak after a late Friday rally. Large retailers, including Target and Walmart, have reported worse than expected earnings and profits this week, blaming higher costs and excess inventory that piled up in response to supply chain problems.
“If I had to sum it up: more uncertainty, more inflation, less growth,” François Villeroy de Galhau, the governor of the Bank of France, said of the impact of the war, at a conference here of finance minsters and central bankers from the powerful Group of Seven industrial nations.
After approving trillions of dollars in fiscal stimulus to avert the downturn caused by the coronavirus pandemic, world economic leaders are now grappling with the threat of “stagflation” — slow, or negative, economic growth, coupled with rising inflation.