BRUSSELS — The global economy is entering a potentially grim period as rising costs, shortages of food and other goods and Russia’s ongoing invasion of Ukraine threaten to slow economic growth and cause a painful global collapse.

Two years after the coronavirus pandemic emerged and left much of the world in a state of paralysis, policymakers grapple with lingering challenges, including clogged supply chains, lockdowns in China and the prospect of an energy crisis as nations squeeze from Russia’s oil. and gas. Those clashing forces are making some economists start to worry about a global recession as different corners of the globe find their economies battered by the events.

Finding ways to avoid a global slowdown while putting pressure on Russia for its war in Ukraine will be the primary focus of the finance ministers of the Group of 7 countries meeting this week in Bonn, Germany. .

The economic challenges facing governments around the world could begin to crumble from the united front Western countries have maintained in fighting Russian aggression, including sweeping sanctions aimed at paralyzing its economy and efforts to reduce dependence on reduce Russian energy.

Policymakers are balancing delicate trades as they consider how to isolate Russia, support Ukraine and keep their own economy afloat at a time when prices are rising rapidly and growth is slowing.

Central banks around the world are beginning to raise interest rates to curb rapid inflation, moves that will dampen economic growth by raising borrowing costs and could lead to higher unemployment.

Global growth is expected to slow to 3.6 percent this year, the International Monetary Fund forecast in April, down from the 4.4 percent it forecast before both Russia’s invasion of Ukraine and the zero-covid lockdowns of Ukraine. China.

On Monday, the European Commission released its own revised economic forecast, which shows a slowdown in growth to 2.7 percent this year from the 4 percent estimated in its winter report. At the same time, inflation is hitting record levels and is expected to average 6.8 percent for the year. Some Eastern European countries are facing much stronger increases, with Poland, Estonia, the Czech Republic, Bulgaria and Lithuania all experiencing inflation rates above 11 percent.

Last week, European Central Bank president Christine Lagarde signaled a potential rise in interest rates in July, the first such move in more than a decade. In a speech in Slovenia, Ms Lagarde likened Europe to a man “who is beaten by fate”.

Eswar Prasad, the former head of the China division of the International Monetary Fund, summed up the challenges facing the G7 countries, saying her “policymakers are trapped in the fact that any tightening of Russia by restricting energy purchasing is exacerbating inflation and hurting growth in their economies.”

“Such sanctions, for all the moral justification behind them, are taking an increasingly heavy economic toll which in turn could have domestic political consequences for G7 leaders,” he added.

Still, the United States is expected to urge its allies to isolate Russia and provide more economic aid to Ukraine, despite its own economic problems. Officials are also expected to discuss the benefits of imposing tariffs on Russian energy exports ahead of a proposed European oil embargo that the United States fears could send prices skyrocketing by restricting inventories. Policymakers will also discuss whether countries like India should be pressured to roll back export restrictions on critical food commodities, which exacerbate already high prices.

Against this backdrop, there is growing urgency to help support Ukraine’s economy, which the International Monetary Fund has said will require an estimated $5 billion a month in aid to keep government operations running. The US Congress is about to approve a $40 billion aid package for Ukraine that will cover some of these costs, but Treasury Secretary Janet L. Yellen has called on her European counterparts to provide more financial aid.

Finance ministers are expected to consider other measures to provide aid to Ukraine. There is growing interest in the idea of ​​seizing some of the roughly $300 billion in Russian central bank reserves that the United States and its allies have immobilized and using that money to fund Ukraine’s reconstruction. Treasury officials are considering the idea, but are skeptical about the legality of such a move and the possibility that it could cast doubt on the United States as a safe place to store assets.

Ahead of this week’s G7 meeting, US officials saw firsthand the economic challenges facing Europe. Speaking with top officials in Warsaw on Monday, Ms Yellen acknowledged the toll the conflict in Ukraine is having on Poland’s economy, where officials have sharply raised interest rates to fight inflation. Poland has taken in more than three million Ukrainian refugees and has faced a cessation of gas exports from Russia.

“They are dealing with tighter monetary policy, just like countries around the world and the United States,” Ms Yellen told reporters. “At a time when Poland is committed to major spending to bolster its security, it’s a tough balancing act.”

A downturn may be inevitable in some countries, and economists are weighing multiple factors when estimating the likelihood of a recession, including a severe slowdown in China linked to ongoing Covid lockdowns.

The European Commission said in its economic report that the EU is “the first of the advanced economies to be affected” due to its proximity to Ukraine and its reliance on Russian energy. At the same time, it has taken in more than five million refugees in less than three months.

Deutsche Bank analysts said this week they considered a recession in Europe unlikely. By contrast, Carl B. Weinberg, chief economist at High Frequency Economics, warned in a note Monday that with declining consumer demand and output, “the German economy is heading for a recession.” Analysts at Capital Economics predicted that Germany, Italy and Britain are likely to experience recessions, meaning there is a “reasonable chance” that the wider eurozone will also be affected, defined as two consecutive quarters of declining output .

Vicky Redwood, senior economic advisor at Capital Economics, warned that more aggressive rate hikes by central banks could lead to a global contraction.

“If inflation expectations and inflation prove to be more persistent than we expect, and as a result, interest rates have to rise further, a recession is most likely on the way,” Ms Redwood wrote in a note to customers this week.

Credit…Diego Ibarra Sanchez for bohobarmadrid

The main culprit is energy prices. In Germany, which has been the most dependent on Russian fuel of the major economies in Europe, pressure is being felt acutely by both the heavy industrial sector and consumers.

Russian gas shipments “support the competitiveness of our industry,” Martin Brudermüller, the chief executive of chemical giant BASF, said at the company’s annual general meeting last month.

While calling for his dependency to be reduced, Mr Brudermüller nevertheless warned that “if the natural gas supply from Russia were to stop suddenly, it would cause irreversible economic damage” and possibly force a shutdown of production.

The consequences of a gas embargo have been the subject of heated debate among German economists and policymakers, with analyzes ranging from manageable to catastrophic. The flow of energy is just one of many supply problems in the industrial sector.

Rising food prices are another issue causing concern among finance ministers. The Treasury Department is expected to release a report later this week detailing plans by the World Bank and other international financial institutions to combat food shortages.

The interruption of wheat exports from Ukraine and Russia, which together account for 28 percent of global exports, along with supply chain disruptions, a severe drought in India that has banned grain shipments and Covid-related lockdowns in China is also causing food prices to rise and world hunger to increase, especially in Africa and the Middle East.

The question for both US and European policymakers is how to contain high prices without sending their economies into recession. The Federal Reserve has begun raising interest rates to curb inflation in the United States, and its chairman, Jerome H. Powell, has acknowledged that it will be challenging to lower prices without seriously harming the overall economy. .

On Tuesday, Charlie Scharf, the CEO of Wells Fargo, said at an event hosted by The Wall Street Journal that “it will be difficult to avoid some kind of recession.”

That conundrum explains the European Central Bank’s unwillingness to raise interest rates. In the plus column, the European Commission noted that unemployment in the eurozone fell, as did government deficits, although war-related costs rose.

As food prices rise around the world, inflation levels vary widely. Food inflation was 2.5 percent in France and Ireland in the first three months of 2022 and 10 percent in Eastern European countries. while in Turkey and Argentina, from 60 to 70 percent in March alone, according to an analysis last week by ING.

Speaking to the Brussels Economic Forum on Tuesday, Ms Yellen claimed that Russia’s actions are a reminder that countries should not trade their national security for cheap energy. She argued that it is crucial to reduce reliance on Russia and China and accelerate investment in renewable resources.

“No country controls the wind and the sun,” said Ms Yellen. “Let’s make sure this is the last time the global economy is held hostage to the hostile actions of those who produce fossil fuels.”

Alan Rappeport reported from Brussels, and Patricia Cohen from London.

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