The war in Ukraine will cost the global economy at least $400bn (£300bn) this year, according to expert projections.
Global growth is set to take a hit, but European countries will be the most exposed to the economic impact of the Russian invasion, according to an analysis by the Economist Intelligence Unit (EIU).
He said rising commodity prices – mainly oil – are the most serious threat to the global economy, followed by sanctions on Russia that will disrupt trade routes.
The economic blow will be felt primarily in Ukraine and Russia, both of which are expected to experience deep recessions this year.
Eastern European countries most dependent on Russian trade, such as Lithuania and Latvia, are also expected to be hit hard.
The EIU cut its growth forecast for Europe in 2022 to 2% from 3.9%.
The euro zone – which excludes most of the major Eastern European countries – should hold up better with growth of 3.7%, against 4% previously.
The global forecast is down to 3.4% from 3.9%.
Commodity prices are expected to continue to rise as the conflict in Ukraine continues. The EIU said the hike would push inflation above its previous forecast by almost 6%.
Oil hit an eight-year high of $114 a barrel on Thursday and analysts said it was realistic to expect $150 a barrel this year.
Consumers are already feeling the effect at the pump – petrol prices rose above 150p a liter for the first time in the UK on Wednesday.
The price of gas – a key export from Russia – is expected to soar, and the prices of agricultural commodities and base metals are also expected to rise.
The EIU said the price increases will be driven by three factors: supply concerns, destruction of physical infrastructure and sanctions.
The forecast assumed that Western countries would not impose a ban on Russian fuel exports.
Agathe Demarais, EIU’s global forecasting director, said: “The US and EU had previously taken a cautious approach to sanctioning Russia.
“Commercial ties between Russia and the EU have made European policymakers reluctant to impose tough measures on Russia. This constraint has disappeared to a certain extent.
“However, measures to restrict Russia’s energy exports are still not being considered, reflecting fears in European capitals that sanctions of this nature could send EU economies into recession.”
The sanctions will also affect supply chains by restricting land, air and sea trade routes. The impact will compound hardships resulting from the pandemic, the EIU said.
Western allies continued to impose new sanctions on Russia after more than a week of war in Ukraine.
On Thursday, the United States targeted 19 Russian oligarchs with visa restrictions, bringing them in line with EU measures taken earlier this week.
Meanwhile, the UK has imposed sanctions on billionaire sports and mining magnate Alisher Usmanov as well as former Russian Deputy Prime Minister Igor Shuvalov.
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This notice was published: 2022-03-03 20:46:25