Macroscope | Russian invasion of Ukraine could send the battered global economy into recession

A Russian invasion of Ukraine and the sanctions such a move would elicit could destabilise global trade, causing untold economic damage

After two years of economic downturn and supply-chain disruptions, the world needs a chance at crisis-free recovery, which means peace is essential

Reading Time:3 minutes

A section of Gazprom’s Power Of Siberia gas pipeline, which supplies gas to China, in Russia’s far eastern Amur region, pictured on November 29, 2019. Russia also supplies half of Europe’s natural gas, and there are fears it could cut supplies in retaliation for US and European sanctions, should it invade Ukraine. Photo: Reuters

Published: 2:30pm, 7 Feb 2022

The world economy is still in a state of fragile recovery from the Covid-19 pandemic and the last thing it needs is the shock of a serious conflict in Ukraine. The stakes are high, tensions are increasing and the damage to global economic confidence would be incalculable.

Global growth is slowing, inflation is rising and world financial markets are in jeopardy. While the chances of a major Russian invasion of Ukraine are low, the risk of another annexation of sovereign territory, as happened in Crimea, should not be underestimated.

The threat of military action and the risk of retaliatory sanctions on Russia by Nato could have major repercussions for the global economy. In the worse-case scenario, the world could be thrown into recession, stock markets left decimated and bond markets caught in the crossfire. It’s a Black Swan event that the global economy can do without.

The world needs every opportunity for crisis-free recovery at the moment. After the pandemic-driven downturn in 2020 and the related supply-chain shortages last year, the global outlook is still under a cloud. Economic morale is slipping, with the J.P. Morgan/IHS Markit global manufacturing purchasing managers’ index edging back to 53.2 in January, a 15-month low for factory activity.

The global PMI has signalled growth for 19 successive months but the outlook is less settled. The US and Europe are seeing continued expansion but at a weaker pace, while manufacturing activity in China is on the verge of contraction.

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.css-1m2rp1p{color:#34b8b5;}Macroscope | Russian invasion of Ukraine could send the battered global economy into recession

Macroscope | Russian invasion of Ukraine could send the battered global economy into recession