In a new posting to Fund’s website, titled “IMF Staff Statement on the Economic Impact of War in Ukraine”, the Communications Department stated: “Countries that have very close economic links with Ukraine and Russia are at particular risk of scarcity and supply disruptions and are most affected by the increasing inflows of refugees”.
Turkey’s Energy Shortage Reaches Critical Point
Turkish economy is highly integrated with Russian and Ukrainian economics, with annual trade flows in excess of $45 bn. The warning that “In many countries, the crisis is creating an adverse shock to both inflation and activity, amid already elevated price pressures. Monetary authorities will need to carefully monitor the pass-through of rising international prices to domestic inflation, to calibrate appropriate responses”. Turkish CPI soared to 54% in February, while energy imports rose by 138%, according February foreign trade data.
Russia Ukraine Conflict: Turkey Is Collateral Damage
President Erdogan is committed to maintaining interest rates low, as matter of preparation of June 2023 elections and for religious reasons, as well. If the war mutates into a prolonged stalemate, or a victory by Russian troops succeeded by years of resistance by Ukrainians, Turkish economy could be devastated, lacking alternatives to Russian energy and tourist flows from both countries.
The warning continues with the following remarks:
The sanctions announced against the Central Bank of the Russian Federation will severely restrict its access to international reserves to support its currency and financial system. International sanctions on Russia’s banking system and the exclusion of a number of banks from SWIFT have significantly disrupted Russia’s ability to receive payments for exports, pay for imports and engage in cross-border financial transactions. While it is too early to foresee the full impact of these sanctions, we have already seen a sharp mark-down in asset prices as well as the ruble exchange rate.
Countries that have very close economic links with Ukraine and Russia are at particular risk of scarcity and supply disruptions and are most affected by the increasing inflows of refugees. Moldova has requested an augmentation and rephasing of its existing IMF-supported program to help meet the costs of the current crisis, and IMF staff are actively discussing options with the Moldovan authorities.
Staff will continue to monitor the spillover effects on other countries in the region, in particular those with existing IMF-supported programs and those with elevated vulnerabilities or exposures to the crisis. The ongoing war and associated sanctions will also have a severe impact on the global economy. The Fund will advise our member countries on how to calibrate their macroeconomic policies to manage the range of spillovers, including via trade disruptions, food and other commodity prices, and financial markets.
The IMF will continue to assess the evolving situation, and provide timely policy advice, financial support, and technical assistance to our member countries as needed, in close collaboration with our international partners.
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