If Russia does invade Ukraine, what are the consequences for the world economy?
We should hope against hope that Russia will not invade Ukraine, but we must be realistic that it may do so. If it does, there will be great human costs, and massive political consequences. Others can comment better about these. Here, let us focus on what this might mean for the world economy. What can we sensibly say?
The starting point is that both Russia and Ukraine are quite small economies, despite the fact that Russia controls the largest landmass in the world and Ukraine the largest landmass (aside from Russia) in Europe. According to the World Bank, in 2020, Russia’s GDP was roughly $1,500bn. Ukraine’s GDP was one-tenth of that, at $150bn. Global GDP was $85,000bn, so together they generate about 2 per cent of the world’s output. Seen through that lens, the direct impact of whatever happens should barely register on the rest of the world.
However, there are such complex links in the world economy that this simple, and…