Russia’s War on Ukraine Will Leave Scars on U.S., World Economies
Russia’s invasion of Ukraine has dealt a blow to the global economy—weakening the postpandemic recovery and aggravating already-high inflation. Even if the worst fears of rising geopolitical tensions and larger economic disruptions do not materialize, private forecasters anticipate an inflationary slump for the world economy. In this context, the U.S. economy faces significant headwinds from higher food, energy and raw material prices. Private forecasters do not anticipate a fiscal/monetary policy mix robust enough to quell surging prices through 2023, raising concerns that above-target inflation could become entrenched. The war’s economic damage will partly depend on the persistence of high inflation and economic “scarring” over the medium to long term.We assess the global outlook through 2023 using Consensus Economics daily forecasts for the U.S. and 36 of its largest trading partners as tracked in the Dallas Fed’s Database of Global Economic Indicators. These countries encompass 83 percent of 2021 global GDP in purchasing-power-parity terms. Purchasing power parity provides a common basis for valuing output across countries.