MacroResearchBoard

Is The European Economic Recovery In Jeopardy? – February 28, 2022

Last week’s war in Ukraine sent a jolt through global financial markets, especially in Europe. So far, the countermeasures taken by those opposed to Russia have been modest, and risk assets subsequently breathed a sigh of relief.

A just-published report examined economic and financial market prospects, and concluded that although the near-run outlook was highly uncertain, Ukrainian developments were unlikely to meaningfully dent the economic expansion, including in Europe. Regional service sector activity is starting to revive with the COVID wave fading and economic restrictions being lifted. In fact, the euro area economy is on track for its best period of growth in over a decade.

While politicians will be very noisy in the coming weeks, our key assumption is that there will be no tit-for-tat escalation in sanctions that might undermine economic sentiment. Forward-looking economic indicators were positive heading into last week, but only time will tell – stay tuned.