The Russian-Ukraine conflict could slash roughly $1 trillion worth of global economic output, a leading forecaster said Wednesday.
The London-based National Institute of Economic and Social Research said the conflict could reduce the level of global GDP by 1% in 2023, and add up to 3% to global inflation in 2022 and another 2 percentage points in 2023.
The report said the main impact of the Russia-Ukraine conflict on the world economy is through higher prices for energy, as well as weaker confidence and financial markets and the strong international sanctions against Russia.
While the sanctions costs to Russia are partly offset by higher prices for gas
exports, the net effect on the economy will be negative with Russian GDP expected to contract by 1.5% this year and by more than 2.5% by the end of 2023. Russian inflation is expected to soar above 20%.
In the U.S., the NIESR now expects inflation to average 7.1% this year, up from a previous estimate of 4.6%, and inflation to still grow by 3.5% next year, up from a previous estimate of 2.5%.