UK National Institute: "Russia-Ukraine Conflict Causes $1 Trillion Shock to Global Economy"

[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The armed conflict between Russia and Ukraine is projected to reduce the global gross domestic product (GDP) by 1 trillion dollars.

According to Bloomberg on the 2nd, the UK National Institute of Economic and Social Research (NIESR) estimated the impact of the armed conflict between Russia and Ukraine on the world GDP to be this significant. It also estimated that the conflict would deepen the supply chain crisis and increase global inflation by 3%.

NIESR stated that the supply chain crisis caused by the armed conflict between Russia and Ukraine will lower growth rates and raise inflation, predicting that the global GDP will decrease by 1 percentage point by 2023.

In particular, it analyzed that Europe is exposed to greater risks than other regions. NIESR diagnosed that due to the increase in refugees within Europe and the need to strengthen defense capabilities caused by the conflict, European governments are in a situation where they must increase spending. It also advised that the European Central Bank should gradually raise the benchmark interest rate given the expected economic impact.

NIESR expected Russia to avoid a recession. It cited the rise in natural gas and crude oil export prices as a reason that could offset the economic shock caused by Western sanctions. However, it forecasted that by the end of next year, Russia’s GDP will be 2.3% lower than previously expected, and inflation will rise to 20% due to the depreciation of the ruble.

NIESR predicted that if sanctions are imposed on Russia’s natural gas and crude oil exports, the Russian economy will suffer severe damage, with significant inflation and a greatly increased risk of recession.

NIESR estimated that by the end of next year, the GDP of the Eurozone and the United Kingdom will be about 1.5% lower than previously expected. Furthermore, it added that as growth slows further, the burden from rising living costs will increase. NIESR forecasted that the average inflation rate in the UK, which recorded 7% this year, will fall to 4.4% next year.

This content was produced with the assistance of AI translation services.