Global Economy Shrugs Off Geopolitical Disruptions

As with any geopolitical risk event, the situation can change rapidly, making forecasting the economic outlook particularly difficult. More often than not, the global economy can shrug off geopolitical disruptions in fairly short order and with minimal long-term impact, says an AllianceBernstein ‘Global Macro Outlook.’ That said, the direction of travel emerging from the Russian invasion of the Ukraine is clear: growth will be lower than previously expected and inflation higher. The magnitude of the impact on growth and on inflation will be determined by how much energy prices rise and how long they stay high. As well, the war, economic sanctions, and the associated rise in energy costs are likely to exacerbate global shipping impediments, which had only just started to recover from the pandemic. As a result, any relief from the easing of supply chain constraints is now further away than it appeared only a few weeks ago.