The economy in retrospect

War: humanitarian tragedy and economic disaster

Russia’s initial plan to quickly conquer Ukraine has failed. That much is clear by now. It seems that Russia is now using bombings and shootings to try and force the people of Ukraine into submission. Aside from the humanitarian tragedy, this aggression is also having a devastating impact on Ukraine’s economy. At the same time, Russia’s economy is under enormous pressure from Western sanctions and will probably contract by 10% to 20%. It would be the biggest downturn since the collapse of the Soviet Union in the early 1990s.

And then there is COVID still

While the COVID pandemic may have been pushed into the background, this does not mean it has altogether disappeared. The Chinese government’s zero COVID policy has prompted lockdowns in various large cities (including port cities) in China, such as Shanghai and Shenzhen. The consequence is a disruption of supply chains: a phenomenon that has plagued the world economy since the COVID crisis began and is preventing economic recovery. For now, it seems the Chinese authorities will maintain this zero COVID policy.

Highest inflation in 40 years

The war and China’s COVID policy have pushed up energy and raw material prices and have disrupted supply chains. The result is sky-high inflation in the Netherlands (12%) as well as the rest of Europe (7.5%). This is putting a damper on producer and consumer confidence and, consequently, economic growth prospects. This has led central banks around the world to revise their growth outlook.