BERLIN: A German study has found that the ongoing Russia-Ukraine war cost the world economy a whopping USD 1.3 trillion in 2022.

The study, which was released by the German Economic Institute  on February 21, claims that Western economies were disproportionately impacted because they lost two-thirds of their global production.

According to German Economic Institute analyst Michael Groemling, the war has a "great global economic relevance." In particular, he warned, issues with the availability of energy and raw materials were placing pressure on businesses all around the world.

Energy price increases in Germany, the biggest economy in Europe, temporarily raised inflation beyond 10% in 2022 before relief measures brought prices back down.The Federal Statistical Office's provisional estimates show that inflation in January stabilised at 8.7%.  "High energy prices produced cost shocks at the production level," the IW stated. "This burden proved difficult to calculate for many enterprises."

The institute highlighted that the ensuing increase in consumer prices "eroded the purchasing capacity of households, which reduced their consumption." Finally, because of the increased costs and global unpredictability, businesses were hesitant to invest. The German Economic Institute forecasts a further USD 1 trillion decline in global value-added for 2023.

The institute highlighted that the ensuing increase in consumer prices "eroded the purchasing capacity of households, which reduced their consumption." Finally, because of the increased costs and global unpredictability, businesses were hesitant to invest.

The German Economic Institute forecasts a further $1 trillion decline in global value-added for 2023. Groemling warned that raw material shortages and uncertainty will "continue to occupy us beyond 2023 and cost prosperity," adding that "the all-clear is regrettably not yet in sight this year."

The International Monetary Fund (IMF) marginally increased its prediction for the world economy in 2023, now anticipating growth of 2.9% rather than 2.7%. The IMF stated that China's "recent reopening has prepared the ground for a faster-than-expected recovery."

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