Outlook 2022 – Q2

The images of 24 February 2022 will stay with us forever. Despite the scale of Vladimir Putin’s military manoeuvres over the past year on the Ukrainian border, the scenario that is currently unfolding before our eyes seemed difficult to imagine until recently for most observers.

But the war is real. And we are now witnessing a crisis that has sent more than three million refugees on the road in less than a month. Beyond the humanitarian tragedy, this conflict is taking place during a time of high inflation, and its consequences limit our short-term visibility.

In order to gain a better understanding, we will try to focus on the various possible scenarios, but also on the economic and financial consequences of the conflict and the position of the central banks.

The war in Ukraine: what are the scenarios?

The conflict between Ukraine and Russia is causing instability for two reasons. The first is the violence of the threats made by Vladimir Putin and his entourage. This language, which is widely repeated in the media, reflects the level of tension generated by the situation.

It also suggests the worst in the event of a confrontation between Russia and NATO. The second reason is an economic one. Firstly, because the sanctions imposed by Western countries are unprecedented, although it is still difficult to measure their impact. Secondly, because Russia and Ukraine export many commodities related to energy, industrial metals, and grains. Many experts have already spoken about wheat, which many countries are extremely dependent on. The direct consequences of these events are soaring prices on the commodity markets. At a time when we are already experiencing high inflation, if this sudden rise continues, it could lead to a recession that central banks will find difficult to manage.

To understand the situation and prepare portfolios for future events, several scenarios should be considered.

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