TOP 2022 TREND, DRAGFLATION: EURO ZONE LEADS THE WAY

Ukraine’s economy will collapse by 38 percent this year if fighting ends soon and 45 percent if the war drags on, according to a study by the Vienna Institute for International Economic Studies.

The war currently centers on Ukraine’s eastern region, which hosts more than a third of the country’s agricultural productivity, 40 percent of its industry, and a majority of its overall economic output, the study noted.

“Even with a political solution, a strong recovery is unlikely to get under way until 2024, since private investors probably will be slow to return to the country,” Vasily Astrov, the institute’s senior economist, told the Financial Times.

Ukraine needs $5 billion a month at least through July to prop up its economy, Kristalina Georgieva, managing director of the International Monetary Fund, said in a public statement late last month.

Russia’s economy will shrink 9 percent this year, the report predicted, and as much as 15 percent if its oil and gas exports are curtailed.

Modest Growth?

The 19-member Eurozone’s GDP grew 0.2 percent in this year’s first quarter beyond the level reached during 2021’s final three months, Eurostat, the European Union’s statistics agency, reported.

The region managed to grow its output despite energy prices rising 38 percent year on year, although they slipped down 3.7 percent in March.

“This surge in energy prices is reducing demand and raising production costs,” Luis de Guindos, vice-president of the European Central Bank, said in a 29 April speech.

Inflation in Europe in April reached 7.5 percent, ticking up from 7.4 percent in March.

Assuming war-related sanctions remain as they are and oil prices hover around $100 a barrel for the rest of this year, Europe will pay about €600 billion for imported fuels this year, or about $634 billion, JPMorgan Chase economists have calculated, which is about 2.5 percent more of GDP than before the COVID War.

If Russia’s fossil fuels are completely embargoed, Europe would then pay an additional 2 to 3 percent of its GDP for energy, cutting sharply into consumer spending and business investment, the bank said.

TREND FORECAST: The data shows that Russia and Ukraine already have moved past recession and succumbed to Dragflation, our Top 2022 Trend of rising prices amid shrinking economic activity. Again, while the mainstream business media is forecasting recession and stagflation, it will be Dragflation: Declining economies and rising inflation.