World macro-economic scenario 2022-2023: rocked by high tensions

World macro-economic scenario 2022-2023: rocked by high tensions
  • Scenario: rocked by high tensions
  • Focus Geopolitics - Three space-time contexts
  • Developed countries - Inflation, inflation, inflation
  • Emerging countries - From one shock to another
  • Sectors
  • Markets
  • Economic & financial forecasts

In summary

The war in Ukraine has upended economic forecasts. Its effects have been immediate and hugely disruptive, through three main channels. First on confidence, by injecting uncertainty; next on supply, by triggering actual or expected shortages; and third on demand by stoking inflation. While countries are set to experience very different spillovers from this latest shock, based on how detached they are from the conflict, how dependent they are on the countries involved and how strong their post-pandemic economies are, none is immune to accelerating inflation, which is already dangerously high. As such, although the Federal Reserve is concerned by domestic inflation, it is unlikely to be very moved by the conflict’s threats to growth, which are primarily in other countries.

World macro-economic scenario 2022-2023: rocked by high tensions

Just like when the Covid pandemic broke out, a "hierarchy" of vulnerability will be established based on several criteria: how far the countries are from the war zone; how much do they trade with Ukraine and Russia (including how dependent they are on grain, natural gas and oil imports, and their energy mix); how sensitive they are to industrial inputs that are likely to be rationed; how strong their post-pandemic economies are; and how easily they can mitigate price increases (particularly through government subsidies) and terms of trade, which are particularly sensitive for emerging countries.

Catherine LEBOUGRE, Economist