The war in Ukraine influences the euro area economy through different channels: increased uncertainty, financial market volatility, reduced exports, higher prices for oil, gas and certain other commodities. Although the economic channels of transmission are clear, the size of the impact is not. Counterfactual analysis of last year’s jump in oil and gas prices provides a reference point but the geopolitical nature of the economic shock reduces the reliability of model-based estimates. Moreover, the other transmission channels should also have an impact on growth. Finally, there is a genuine concern that, the longer the crisis lasts, the bigger the economic consequences because eventually, months of elevated uncertainty would end up weighing heavily on household and business confidence.
After a spectacular rebound in 2021, global trade in goods is likely to see slower growth this year. The World Trade Organisation’s latest forecasts show that trade in goods will rise by 4.7% this year, following a jump of 10.8% in 2021. The global PMI manufacturing new orders index also fell below the 50 threshold in January, for the first time in a year and a half. That said, the slowdown will not be visible in all sectors. Indeed, demand for semiconductors remains very high, and this dynamic largely explains why Taiwan continues to record rapidly rising export orders.
