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What’s the outlook for the Russia-Ukraine war?

Changing fortunes: On the eve of war just over a year ago, our Consensus Forecasts were for Ukraine and Russia to record GDP growth of 3.4% and 2.6% respectively in 2022. Today, the situation is rather different. Ukraine’s economy likely contracted by roughly a third last year, due to sustained infrastructure damage, export disruption, plummeting investment and mass migration. Russia’s GDP also shrank—albeit by less than expected—as trade ties with Europe and the U.S. were severed.

No quick fix: Our panelists have little faith in a swift resolution to the conflict: In a recent special survey we conducted, the vast majority—89% of the 28 analysts polled—did not expect the war to end in 2023. With Zelensky increasingly aided by the military heft of the West and Putin keen to have something to show for his invasion, neither leader appears in the mood to back down.

Variation in real GDP for Ukraine and Russia

Military risks: Predicting the evolution of the conflict entails significant uncertainty. Risks such as a step-up in NATO’s military support to Ukraine, Chinese arms sales to Russia, the deposition of Putin and/or Zelensky, Belarus’ involvement in the war and energy price volatility all have the potential to tip the balance of the war in one direction or another. But in the near term, stagnation still appears the most likely scenario.

Low-to-no growth: This dim view of the military scene explains our equally downbeat forecasts for both Russia and Ukraine’s economies. Russia is projected to contract again this year, as energy prices trend lower and the noose of Western sanctions tightens; the EU banned Russian crude imports in December and oil derivatives from February, while the G7 has recently announced price caps on Russia’s energy exports. Ukraine will see growth, but this will largely reflect the low base of comparison— the economy will remain far below its pre-war size, and a significant rebound in output will be impossible until the intensity of the fighting eases. Pre-war economic conditions will not return in either country for years—or even decades.

Insights from Our Analyst Network

On the war, Mark McNamee, director, FrontierView, said:

“The war is unlikely to end until either the collapse of either the Zelenskiy regime in Kyiv or the Putin regime in Moscow. Where we sit today, neither seems likely unless there is a major successful offensive by either side this spring.”

On Russia’s economic outlook, analysts at Berenberg said:

“Having started a brutal war, Putin has no easy way out. Ukraine and the free world are standing up to him. The expenses of war, the slow poison of sanctions, the flight of parts of the urban elite and the mounting costs of repression will be a worsening drag on Russia as long as Putin remains in power.”


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