Economic costs of the Russia‐Ukraine war

Abstract

AbstractThe unprovoked and brutal invasion of Ukraine by Russia on 24 February 2022 is imposing a terrible human cost. In this paper, we use the National Institute Global Econometric Model (NiGEM) to quantify the impact of the war on the global economy. The war represents a massive cost, equivalent to 1% of global GDP in 2022, or about $1.5 trillion valued at purchasing power parity exchange rates (PPP), compared with our GDP forecast made at the beginning of 2022. Europe is the region affected most, given trade links its proximity to Ukraine and Russia and its reliance on energy and food supplies from those countries. GDP in Europe is expected to shrink by more than 1% in 2022 compared with our forecast at the beginning of 2022. In Western Europe, Germany will be worst affected, followed by France and Italy. GDP in ‘Developing Europe’, where Ukraine is the largest representative, is expected to shrink by 30%. The war will also add about 2% to global inflation in 2022 and 1% in 2023, compared with NIESR's inflation projection at the beginning of 2022.