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What Are the Economic Risks from Russia's Ukraine Invasion?  

Prominent economist Nouriel Roubini is warning of six economic and financial risks from the conflict in Ukraine. Roubini shares his view in a column on Project Syndicate.

ukraine g2afeb4ef7 640The risks he outlines include:

A global stagflationary recession: Roubini says this scenario is now highly likely. “Analysts are already asking themselves if the Fed and other major central banks can achieve a soft landing from this crisis and its fallout,” he writes. “Don’t count on it.” He says the war in Ukraine will “trigger a massive negative supply shock” to the world’s economy, which will reduce growth and increase inflation even further. The biggest impact will be felt in Russia and Ukraine, followed by Europe. However, the U.S. will feel pain too.

Limited ability for damage control: A deep stagflationary shock will make it harder for central banks to do damage control. If they slow interest-rate hikes to support growth, “slower policy tightening could accelerate the de-anchoring of inflation expectations, further exacerbating stagflation.” However, if central banks grow more hawkish, “the looming recession will become more severe.”

A new-old problem: The West can’t count on fiscal policy to counter the “growth-dampening effects” of the war in Ukraine. Many used most of the tactics in their arsenal to combat the impact of the pandemic. “We are facing a negative supply shock in a world where inflation is already rising and well above target.”

Read Roubini’s full post on Project Syndicate.

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