How Russia’s invasion of Ukraine will hit the global economy

How Russia’s invasion of Ukraine will hit the global economy

A conflict that could develop into Europe’s biggest since the second world war has shattered hopes of a strong global economic recovery from coronavirus, at least in the short term.

Russia’s further invasion of Ukraine on Thursday shook financial markets and the increased geopolitical tensions are set to exacerbate high inflation and supply chain bottlenecks.

The direct impacts of lower trade with Russia, economic sanctions levied on Moscow by the US and EU and financial contagion are likely to be outweighed by the indirect consequences from the effect on business and consumer confidence and commodity markets, economists said.

These repercussions could range from relatively limited to extremely serious. If energy prices continued to soar, for example, it could easily tip the global economy into a second recession in three years.

Economists said the following issues were the most important to watch.

How bad does the war get?

Russian president Vladimir Putin’s desired endgame is currently unclear, as are the likely responses from other countries. Analysts are considering several scenarios that range from a change of government in Kyiv to a Moscow-friendly regime to a wholesale attempt to redraw the international boundaries of Europe and beyond.

Holger Schmieding, chief economist of Berenberg Bank, said the first thing to