Tatiana Orlova (Oxford Economics) | In the early hoursoftoday, Russian military forces attacked military targets across Ukraine. Border guards reported that Ukraine’s territory was being shelled from five regions, including Crimea and Belarus.
Due to events over the past 24 hours, with Russia now intent on installing a “friendly” government in Ukraine, we have moved our global baseline in line with our scenario for a full-scale invasion.
Although a protracted military conflict is possible, we still do not expect a permanent occupation of all of Ukraine by Russia in our base case. Russia’s actionsclearly show that a prolonged period of instability,with possible large spillovers for Europe and potentially the world,is nowmore than a tail risk.
We will incorporate higher European gas, oil and food prices over the medium termin our baseline, as well as more financial market disruption and tougher EU and US sanctions onRussia. The impact of these changes on our forecast forthe global economy is significant, cutting 0.2ppts from GDP growth in 2022 and 0.1ppts in 2023.
Of the major economies, Russia will bear the heaviest impact due to the impact of its self-imposedinternational isolation.We intend to lower our baseline for Russian GDP by 1.2% by 2023. We will also lower our forecasts for Europeaneconomies,but by around only half that amount