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Russia’s war in Ukraine remains biggest driver of global uncertainty, says IMF

Russia’s war in Ukraine remains biggest driver of global uncertainty, says IMF
Ed Stoddard
By Ed Stoddard
30 Jan 2023
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According to the World Uncertainty Index compiled by the International Monetary Fund, Russia’s war in Ukraine remains by far the biggest driver of ‘global uncertainty’, which remains at extremely elevated levels. This hurts economic growth and investment flows, and is a pointed reminder that Pretoria’s foreign policy does not have SA’s best interests in mind.

More than one commentator has spoken about our current “age of uncertainty” and there are few things that rattle markets and investors more than groping in the dark without a headlamp to shine at least some light on the path ahead. 

The International Monetary Fund (IMF) recently updated its innovative World Uncertainty Index (WUI) to track these trends on a monthly instead of quarterly basis. While the index declined in December, it remains at extremely elevated levels. And the biggest source of uncertainty, by a country mile, is Russia’s war in Ukraine, a point driven home by the IMF’s Chart of the Week. 

“Uncertainty jumped following the United Kingdom’s unexpected vote to leave the European Union — and soared even further after the surprise outcome of the 2016 presidential election in the United States. This was followed by US trade tensions with China, which caused major uncertainty for the world,” the IMF notes.  

“Another big spike followed in early 2020 with the onset of the coronavirus pandemic, followed less than two years later by another shock from Russia’s invasion of Ukraine and renewed trade uncertainty associated with the risk of geoeconomic fragmentation.” 

The index is based on a textual model. Using Economist Intelligence Unit reports, it is derived from an analysis that draws on words published in proximity to mentions of uncertainty. 

Uncertainty casts a shadow over economic growth and by extension investment flows. It’s a key reason global economic growth is seen as slowing this year.  



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South Africa alone has enough domestic uncertainties to sink a Russian battleship. The power crisis, Transnet’s woes, erratic weather patterns and the threat of explosive levels of social unrest all shroud the future in a haze like the clouds of smoke that hang over a service delivery protest. And the words ‘political’ and ‘policy’ are frequently found in proximity to the word ‘uncertainty’ in South African public discourse.  

Returning to Russia’s vicious invasion of Ukraine, the WUI is also a pointed reminder that Pretoria’s foreign policy hardly has the best interests of South Africa in mind — a clear sign that it is probably only in the interests of certain elements in the ANC.  

The unfolding cost-of-living crisis in South Africa spurred by surging food and fuel inflation, which triggered a decline last year in real wages, is partly rooted in Russian President Vladimir Putin’s aggression. And slowing global economic growth, another of the war’s casualties, is inflicting significant collateral damage on the South African economy. The country is poorer as a result, and already glaring disparities in wealth and income are almost certainly widening. 

The only certainty in this mess is that South African policy on the domestic and foreign fronts is going to continue to send uncertain signals to investors. DM/BM

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