A darker economic scenario from Russia’s war

We have modelled a plausible downside scenario in which the fighting in Ukraine lasts well into 2023, the west imposes further sanctions and Russia retaliates by restricting gas supplies.

What you will learn:

• In this downside scenario, the impact on Russian GDP is very severe at 7% below our no-conflict baseline in 2023, and severe but lower on the eurozone at 3.2% down in 2023. Russian GDP contracts by 3.1% in 2022, rebounding by only 1.4% in 2023. Eurozone GDP growth slows to 2.2% this year and 0.9% in 2023.
• The impact on the level of global GDP is significant at 0.6% in 2022 and 1.1% in 2023. But global growth remains close to 3% in both years, as even in this downside scenario the spillovers to the Americas and Asia are mild. As in the baseline, the adverse impact of higher inflation is key. But in this scenario, it is amplified by a loss of confidence among markets and consumers.
• This is not a worst-case scenario. More severe conflict scenarios are possible. But we regard this downside scenario as a relatively high probability for how the economy could deteriorate in the event of a more.