With Russia’s war in Ukraine a month away, Trust Economics (https://trusteconomics.eu) has its estimates for the global economy outlook this year. Within this short period of time, forecasts shifted from a limited recovery after COVID to an increasing chance of a full-blown global recession.
The chances of a recession are rising, given the volatile inflation that the FED and other central banks have already begun trying to curb with interest rate hikes.
The scenario of the global recession
The chances increase especially if more Russian energy export companies go out of business in the coming weeks and months.
It is recalled that the European Union and its largest economy, Germany, are so far reluctant to follow the American example, and to ban imports of Russian energy or to impose sanctions on Russian oil and gas exports. This is because Europe depends on Russia for more than a quarter of its oil supply and a third of its gas supply.
The worst case scenario
Analysts at Trust Economics estimate that in the worst-case scenario of the Russian war in Ukraine with a serious, escalating upheaval with a moderate policy response, and in a situation in which oil and gas exports from Russia to Europe have closed, Brent prices will jump to $150 a barrel.
It should be noted that in this worst-case scenario, shattered confidence and continued high oil prices would reduce consumer and business spending in the United States and lead to a recession.
What should be observed is how in the United States, the Federal Reserve Council will react to the impact of the spike in oil prices and the jump in prices for agricultural products, minerals and minerals (gas prices). in the US are largely independent of Europe).
With much of Russia’s energy exports out of the market all year round, a global economic downturn seems imminent.
In this scenario, the slowdown could be more prolonged than the 1991 recession following the oil supply shock of Iraq’s invasion of Kuwait in 1990.
It is observed that before every recession, in the last 50 years, there has been an increase in the price of oil and this in this case seems to be reappearing, reports Trust Economics.
Rising inflation and high uncertainty about the world economy with the Russian war in Ukraine could threaten economic growth.
Estimates
UNCTAD, the United Nations World Trade Organization (WTO), downgraded its forecast for global economic growth in 2022 to 2.6% from 3.6% due to the war in Ukraine and changes in macroeconomic policies made in recent years and months. Please read the analysis entitled “UNCTAD: Developing countries will need $310 billion to meet external debt service requirements“.
According to its March 24 Trade and Development Report (https://unctad.org/system/files/official-document/tdr2021-update1_en.pdf), UNCTAD says that while Russia will experience a deep recession this year, growth is expected to slow significantly in parts of Western Europe and Central, South and Southeast Asia.
