Macroeconomic Implications of the Russo-Ukrainian War, 2022

Geopolitical Chaos to Accelerate Trade and Supply-chain Reorientation and Enhance the Manufacturing and Export Potential of Rest-of-the-World Economies

Following a robust economic recovery in 2021, global economic conditions were set to slowly normalize in 2022, with downside restraints emerging from the tightening of global financial conditions, sporadic virus outbreaks, and supply disruptions. However, the Russo-Ukrainian war has unleashed new levels of volatility across the global economy. Global commodity prices have risen, with the war also exacerbating fragile global supply chains as well as rising inflationary pressures. Enduring Western sanctions on Russia amid a drawn-out conflict stands to undermine global GDP growth in 2022 and potentially in 2023.

Against this backdrop, how will the Russo-Ukrainian war impact GDP growth in key economies? To what level will the geopolitical crisis spur global trade and supply-chain reorientation in 2022 and beyond? How will central banks navigate the economic tradeoff between mounting inflation and weakening growth, impacting firms’ borrowing decisions? What is the outlook for the energy market in 2022?

This analysis delves into the GDP growth outlook for select economies, delineates the impact of the conflict on global trade, and identifies winners and losers from the supply-chain policy reorientation. Another key feature of this report is the inflation and monetary policy outlook with implications for firms’ pricing and borrowing decisions. By analyzing the extent of disruption in key industries, this report provides insights into the near-term outlook for aviation, automotive, metals, and agriculture sectors.

The deliverable also provides insights into oil and gas market dynamics in 2022 under a baseline scenario by evaluating the impact of sanctions, supply constraints, and demand shifts. Finally, the study highlights a medium-term view of global policy pivots in response to the war in the context of securing supply-chain vulnerabilities, mitigating energy security risks, and shifts in trade and investment dynamics. Growth opportunities arising from the disruptions and key strategic imperatives for businesses crucial to minimizing the impact of higher input costs and raw material shortages are also analyzed.

Key Issues Addressed

• How will the Russo-Ukrainian conflict impact the GDP growth outlook for select economies?
• How will monetary policies change in response to a rapid build-up of inflationary pressures?
• Which are the key channels of global trade disruption as a result of the conflict?
• What are the implications of trade and supply-chain reorientation for different economies?
• What are the oil price expectations for 2022?
• How will the gas market demand and supply dynamics evolve?
• How will the war impact key industries, including automotive, metals and mining, aviation, and agriculture?