Economic consequences of the Russia-Ukraine conflict: Stagflation ahead

The Russia-Ukraine conflict has triggered turmoil in the financial markets, and drastically increased uncertainty about the recovery of the global economy. Since our last publication, the world has shifted, so have the risks.

• Higher commodity prices intensify the threat of long-lasting high inflation which increases the risks of stagflation and social unrest.
• Certain sectors such as automotive, transport or chemicals are more likely to suffer.
• Coface forecasts a deep recession of 7.5% for the Russian economy in 2022 and downgraded Russia’s risk assessment to D (very high).
• European economies are most at risk: at the time of writing, Coface estimates at least 1.5 percentage point of additional inflation in 2022, while GDP growth could be lowered by 1 percentage point. Together with a complete cut of Russian natural gas supply, this could cost at least 4 points of GDP, thereby leading EU GDP growth close to zero – and possibly in negative territory – in 2022.