Global | War, interest rates and COVID-19 map out the economic landscape

Summary

We have become used over the last decade to major shocks to the economy coming from factors which are not strictly economic in nature; whether they are protectionist policies, COVID-19 or, now, the war between Russia and Ukraine, which has worsened the global outlook and increased uncertainty.

Key points

• Key points:
• Although financial stress has been reduced in recent weeks—once it became clear that the conflict would not extend to other regions—and oil and natural gas prices have come down from the highs reached in March, these still remain at very high levels.
• They represent a major supply shock to the global economy, especially in Europe, where growth could fall 3pp from 2021 — down to 2% in 2022 and 1.8% in 2023.
• In China, the resurgence of the pandemic and the continued zero-tolerance policy toward the disease have led to a revision of the country's growth forecast for this year to around 5%.
• The economic outlook in the United States will be determined more by economic policy and the battle against inflation than by the collateral damage from the sanctions imposed on Russia, which only affect it insofar as they add further inflationary pressure on an already overheated economy.

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