War in Ukraine will hit Europe’s economy

Russia’s invasion of Ukraine means that the economic impact of the conflict on Europe will be larger than we previously assumed. Our new baseline sees
higher gas, oil and food prices over the medium term, as well as increased
disruption in financial markets and greater sanctions on Russia by the EU, UK
and US.

What you will learn:

• This means an even ‘higher for longer’ period of inflation in the euro
  area, with increased risks of it becoming entrenched and a larger impact on households’ real incomes and industries’ supply lines.
• While we do not yet incorporate a permanent occupation of all Ukraine by Russia in our base case, the severity of the conflict and the speed at which events are moving means that extreme scenarios such as a suspension of gas supplies to Europe are no longer unthinkable.
• A protracted period of severe tensions is still the more likely scenario, risking more permanent damage to the European economy, which means that risks to the outlook have now moved firmly to the downside.