The Centre for Economics and Business Research, a UK think tank, is warning on the impact on western living standards, already under pressure, from rising inflation and potentially slower growth as a result of the Ukraine crisis.
“Any international action will likely not only add to the current inflationary binge, possibly bringing inflation close to 10% in the main Western economies, but also should slow down growth quite rapidly.
World GDP growth in 2022 had been forecast to be about 4% at the turn of the year. Rising inflation has been edging this down and it might fall as low as 2% with the inflationary spur from the conflict with Russia if severe sanctions cause a much more serious spike in energy prices, pushing oil towards $130 and gas to 300p a therm with corresponding moves in metal prices.
This would mean no growth at all for the rest of the year and possibly with some quarters of contraction so getting close to a recession (on the technical definition of two consecutive quarters with negative growth).
Perhaps the biggest issue that will determine how severely the West is affected by the issues with Russia is whether there is the cohesion and willpower to put up with sanctions on the scale that might eventually affect Russia. The analysis above suggests that action could be costly, particularly for living standards that are already under pressure.”