Economic Consequences of the Russian Invasion of Ukraine

The war in Ukraine is not only a military and geopolitical turning point. It is also changing the economic situation. This affects both the short-term economic trend and the medium-term prospects for growth and prosperity. The previously expected economic recovery will be weakened. There is a threat of stagflation, i.e., a combination of weak growth and high inflation. Monetary policy faces a dilemma: while interest rate hikes can curb inflation, they would further dampen growth.