Russia invasion, sanctions, cause risks to swell
Genevieve Signoret
(Hay una versión en español de este artículo aquí.)
Last week, Russia invaded Ukraine. Over the weekend, the West imposed financial sanctions on Russia to take effect this morning 28 February 2022 that will almost surely spark a financial crisis in Russia that could spread to global markets. We thus revise our global macro forecast framework: assumptions and the probabilities we assign to our three scenarios.
Risk of recession is up, Russia–Ukraine assumption is updated
One of the key risks to our central scenario was the risk that Russia would invade Ukraine. It materialized. Thus, we revise up the subjective probability of our recession scenario to 15% from 10%.
All our forecast assumptions as to Russia and Ukraine revolved pertained to whether Russia would invade. These assumptions are now obsolete. We therefore update them. Whereas in our original forecast framework, we made assumptions as to whether Russia would invade Ukraine, in this our post-invasion version, we instead make assumptions as to whether the negotiations to take place at the Belarus border this morning 28 February 2022 will succeed and whether the financial crisis sure to erupt in Russia will prove globally contagious.
These changes are marked in red in the following table:
You can download a PDF version of this table here.
With Putin having announced a nuclear alert, we have also added to our list of assumptions underlying all three scenarios (those that rule out tail risks) that the armed conflict will not extend beyond Ukraine’s border (the new assumption appears in red font).
Narratives and numbers will undergo revision soon
Note that the 28 February 2022 talks can collapse as soon as we get this published. For the next several days, we expect the shelf life of our Russia–NATO assumptions to be 12-48 hours. Once they gel, our views can gel, and we can move on to also revising our forecast narratives and numbers.
Hey! There are typos in the following sentences:
1. China does not invade_s_ Taiwan.
2. Israel does not attack_s_ Iran.
3. A second pandemic does not break_s_ out.
Thank you! We fixed it.