War and supply chain shocks dampen global economic outlook

We have downgraded our GDP growth forecasts due to repercussions from Russia’s war on Ukraine and, to a lesser extent, the prospect of further Covid-related supply chain disruption in China. We now expect global GDP growth of 3.4% this year. This is 0.3ppts below our forecast at the start of March and 0.6ppts lower than our February forecast – the last before Russia invaded Ukraine.

What you will learn:

• We think a stagflation scenario of high inflation and low economic growth is still a long way off.
• We expect global CPI inflation to peak in Q2 and then fall back as oil and gas prices start to edge lower, growth weakens, supply chain pressures ease, and households reorientate some of their spending back to services from goods.
• We continue to believe that structural forces are likely to prevent major second-round inflation effects from materialising, reducing the likelihood of sustained high inflation.